United Nations held the COP29 climate summit, Shell won an appeal on Tuesday overturning a major ruling that required the company to accelerate its carbon reduction efforts. In 2021, the oil and gas giant was ordered to significantly reduce its global carbon emissions by almost half.
According to media reports, the appellate court in The Hague stated that Shell has a responsibility to reduce greenhouse gas emissions. However, the court overturned the 2021 ruling that by 2030, Shell should reduce its absolute carbon emissions by 45% compared to the 2019 levels, including emissions caused by the use of its products.
The 2022 Russian invasion of Ukraine led to a surge in oil and gas prices, making governments and shareholders more focused on costs rather than carbon emissions.
The ruling on Tuesday coincides with the opening of the COP29 climate summit in Azerbaijan, marking the latest turn in this landmark case.
Shell’s CEO, Wael Sawan, stated that Shell believes this ruling is “the right decision for global energy transition, the Netherlands, and our company.”
“Netherlands Friends of the Earth,” who initiated the lawsuit in the Netherlands in 2019, stated that they will continue such struggles with large companies but did not disclose whether they will appeal further to the Dutch Supreme Court.
The 2021 ruling was made when Shell was headquartered in The Hague. In 2022, Shell’s headquarters moved to London. Tuesday’s ruling may have far-reaching implications for future climate litigation cases.
During an appeal hearing earlier this year, the British oil giant argued that there was no legal basis for the case.
The court stated in a statement, “The court cannot establish a social care standard that requires Shell to reduce its CO2 emissions by 45% or any other percentage.”
Shell stated that it is already moving towards meeting the court’s order in its own production, with its emissions being 30% lower than 2016 levels last year.
Like some of its peers, Shell has downsized its renewable energy business, as these operations take longer to become profitable compared to oil and gas.
However, the company plans to invest $10-15 billion in low-carbon energy between 2023 and 2025.
In March, the company revised its product sales target, aiming for a 15%-20% reduction in net carbon intensity by 2030 compared to 2016, while retracting the previous target of a 45% reduction in carbon intensity by 2035.
Citi analysts stated that Tuesday’s ruling is the best outcome for Shell.
Citi noted, “While success in the appellate court may not mean the end of legal proceedings, it indicates that the company’s strategy is now firmly in the hands of shareholders, which we believe will have a positive impact.”
Also on Tuesday, Shell and Equinor of Norway urged the Scottish court to uphold the UK’s approval for the development of two North Sea oil and gas fields as environmental activists tried to block these projects.