By Ayyoub (Hazhar) Jamali, postdoctoral researcher at the University of Zurich
In a landmark decision from the Netherlands, an appeals court has ruled in favor of Shell, overturning a previous order requiring the company to slash its carbon emissions by 45% by 2030. The verdict not only grants Shell a reprieve from immediate, stringent emissions targets but also underscores complex legal questions about the role of private companies in addressing climate change and the primary responsibility of governments in enforcing emissions reductions. However, the decision offers no long-term relief for the corporation, as it recognises the corporations human rights obligation to limit emissions.
Background
In 2021, a Dutch district court issued a historic decision, ordering Shell to sharply reduce its CO2 emissions, aligning with the Paris Agreement’s goal of limiting global warming to well below 2°C above pre-industrial levels. The case was filed by the environmental group Friends of the Earth Netherlands (Milieudefensie) along with 17,000 Dutch citizens, arguing that Shell had a duty of care to safeguard citizens from the adverse effects of climate change.
The original 2021 decision was hailed as a victory for climate justice, marking the first instance of a court holding a private company to the climate targets set forth by an international treaty. It offered hope to environmentalists and climate change activists seeking similar legal actions to hold corporations accountable for their climate impact.
The Shell then appealed, arguing that holding a single company accountable for a global problem would unfairly penalize it without yielding meaningful climate benefits. The company maintained that governments, rather than corporations alone, bear primary responsibility for implementing climate policy that protects human rights and curtails emissions. Shell defended its climate policies by pointing to its own emissions targets. It aims to reduce the carbon intensity of its products by 15-20% by 2030, with a longer-term objective of achieving net-zero emissions by 2050. These goals, Shell argued, are a balanced approach to addressing climate change within its industry’s constraints and the broader global energy market’s demands.
The Court of Appeal’s Decision
The appeals court acknowledged that while Shell has ‘an obligation toward citizens to limits its CO2 emissions,’ it was not legally required to reduce emissions by a specific percentage such as the 45% set in the original ruling. The court cited an absence of an agreed-upon standard within climate science about the exact amount of emission reduction required for individual companies, underscoring the difficulty of assigning strict benchmarks for corporate emissions.
Moreover, the court emphasised that ensuring human rights protection, including protection from climate change, is primarily up to the government. This distinction is crucial as it places the ultimate accountability for emissions regulations on governmental bodies rather than corporations, which operate within the framework of policies set by those governments. The court noted that Shell was already working to curb emissions in its production processes and argued that even if Shell halted its fuel sales, other companies might simply fill the gap to meet ongoing demand for fossil fuels, effectively resulting in no reduction in overall emissions. This reasoning aligns with Shell’s assertion that addressing climate change requires coordinated policy shifts across the entire energy sector, rather than targeting individual companies in isolation.
Concluding Remarks
The appeals court’s decision arrives at a time when nations around the world are convening for COP29 in Azerbaijan to discuss their own commitments to climate goals, underscoring the international focus on policy solutions to climate change. Adding to the complexities of the global climate policy landscape, the recent U.S. presidential election saw the return of Donald Trump, a known climate policy skeptic, which could further complicate the global effort for fighting for climate change justice.
While the outcome of this case appears to be unfavourable for climate change litigation, it offers no sign of relief for corporations in a longer run. The fact that the appeal court acknowledged the responsibility of Shell to limit emissions remains a noteworthy aspect of the case. The court of appeal fully upheld the district court’s recognition of Shell’s human rights-based obligation to combat dangerous climate change—a responsibility that extends to its scope 3 emissions, covering the emissions from the use of its products. This recognition underscores the growing acceptance of corporate accountability in contributing to global emission reduction efforts. Furthermore, while the appeals court refrained from ruling on Shell’s planned investments in new oil and gas fields, it noted that such investments could conflict with Shell’s obligation to reduce emissions. Although this issue was not central to the proceedings, it points to a potential future clash between corporate investment strategies and climate responsibilities.
However, the ruling lacks clarity in specifying Shell’s ‘special responsibility’ and stops short of imposing a clear legal mandate, leaving questions about the enforceability of such obligations. This case is not over yet. The applicants can either accept the ruling or appeal the case further to the Dutch Supreme Court. Given the importance of this issue and the potential of this case, it is likely that they will pursue the latter option. This could shape the future of corporate climate responsibility in the Netherlands and beyond.