A court in the Netherlands on Wednesday told Shell to cut its carbon emissions far more aggressively than currently planned, in what climate activists claimed as a landmark ruling with implications for fossil fuel groups globally.
The Shell ruling came on a turbulent day for the world's oil giants, with fellow supermajors ExxonMobil and Chevron also under pressure over their decarbonisation plans.
A Dutch judge ordered Shell to reduce CO2 emissions by 45% by 2030 against 2019 levels, after hearing a case brought by Friends of the Earth and other groups, plus 17,000 Netherlands citizens.
The Anglo-Dutch group has so far committed to a carbon intensity reduction of its products of 20% by 2030 and 45% by 2035, compared to 2016 levels, as part of a 2050 net zero push.
But the court said those goals were “insufficiently concrete and full of conditions” as it ordered the far tougher action it said would bring the ambitions into line with the Paris climate agreement.
Although the judgment is open to appeal – which Shell indicated it would – Friends of the Earth labelled it a “historic victory” for climate action that has “enormous consequences for Shell and other big polluters globally” and should embolden other campaigners elsewhere.
Rachel Kennerley, climate campaigner at Friends of the Earth England, Wales and Northern Ireland said: "This ruling confirms what we already knew, that global polluters cannot continue their devastating operations because the costs are too high, and they have been that way for too long.
“Today an historic line has been drawn, no more spin, no more greenwashing, big oil is over. The future is in clean renewables.”
The International Energy Agency earlier in May recommended that no more new fossil project investments should be made in order to keep the world on a path to net zero.
'Climate cases to grow'
Analysts were divided over the implications of the Shell judgment for the global fossil sector.
Liz Hypes, senior environment and climate change analyst for Verisk Maplecroft, a global risk and strategic consulting firm, believes the judgement could pave the way for legal action against energy companies.
“This case could mean open-season on heavy-emitters in the oil and gas industry, and it is not a stretch to envisage activists – or even unhappy investors – bringing similar cases against others in the industry and, potentially, their financial backers.
This case could mean open-season on heavy-emitters in the oil and gas industry.
“While cases like this have to date been largely limited to the US and Europe, we’ve seen a rising trend outside of these countries of climate lawsuits ruling in the claimants’ favour.”
Hypes added: “What this signifies to investors and climate activists is that taking companies to court is an increasingly successful means of triggering climate action and, because of this, the number of climate cases faces carbon-heavy corporates will grow. It shows that the risks of inaction – or of what consumers, investors and the public see as ‘not enough’ action – is mounting.”
"It’s no longer a brand image issue for companies – they are facing genuine legal risks from which the repercussions may be significant and it’s triggering a real discussion about what is their fiduciary duty during the climate crisis.”
However, Rystad Energy head of shale Artem Abramov said: “When I saw the news, the first thing I did was to check the stock market reaction. Looking at the general market movements among peer firms today I saw was no major net reaction at all.
“As shareholders kept their calm, I conclude that the news have little relevance for the actual business and the significance of this ruling could be somewhat exaggerated.
“Of course this court decision is the first of its kind globally, and that deserves attention, but there will be a thorough appeal process as already outlined by Shell.”
Shell is among a clutch of European oil & gas groups that have been among the most active in the global fossil sector in renewables, taking major positions in areas including offshore wind, green hydrogen and energy storage.
As recently as this week Shell was involved in a $2.5bn deal to supply and store solar power in Australia.
Shell said in a statement sent to Recharge: “Urgent action is needed on climate change which is why we have accelerated our efforts to become a net-zero emissions energy company by 2050, in step with society, with short-term targets to track our progress. We are investing billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels.
“We want to grow demand for these products and scale up our new energy businesses even more quickly. We will continue to focus on these efforts and fully expect to appeal today’s disappointing court decision.”
ExxonMobil and Chevron under pressure
The Shell ruling came on a day when two other of the world's oil giants found themselves in the energy transition spotlight.
Activist investor group Engine No.1, which is targeting ExxonMobil over its decarbonisation plans, succeeded in electing two of its members to the group's board, although former Vestas CEO Anders Runevad, also on the slate, was not among them.
ExxonMobil was dealt an additional black eye when two shareholder-introduced measures calling for full disclosure of political lobbying and climate lobbying were approved over the company’s recommendation against them.
Chevron shareholders on Wednesday easily passed a resolution in favour of cutting emissions generated by the use of the its products during the company’s annual general meeting.
A total of 61% of shareholders voted for an open-ended proposal for Chevron to cut its Scope 3 emissions, or the emissions created by customers of Chevron’s products.
Additional reporting from Mark Passwaters and Jennifer Lynn Presley from Recharge's sister title Upstream