AMSTERDAM (Reuters) – A Dutch appeals court on Tuesday dismissed a landmark 2021 ruling that ordered oil and gas giant Shell (LON:SHEL) to accelerate carbon reduction efforts, which had been seen as a turning point in climate litigation.

Main Parts of the Verdict and Reaction

SHELL IS OBLIGED TO REDUCE CO2 EMISSIONS

The court stated that protection against global warming is a basic human right, obligating companies like Shell to reduce their greenhouse gas emissions. Furthermore, it ruled that courts can compel companies to accelerate climate policies even when targets are not expressly set in international treaties or national laws.

> "Products from companies like Shell have caused the climate problem. These companies have a human rights obligation to everyone in the world to reduce their CO2 emissions," said Presiding Judge Carla Joustra.

SHELL IS NOT AT RISK OF MISSING TARGETS FOR ITS EMISSIONS

The court indicated that Shell's direct emissions reductions (Scope 1 and 2) align with the demands of climate activists involved in the case. The original 2021 ruling had required Shell to cut its absolute carbon emissions by 45% by 2030 compared to 2019 levels, which includes emissions resulting from the use of its products (Scope 3).

Documents revealed that Shell's production process emissions were 31% lower than 2016 levels last year, and the company aims for a 50% reduction by 2030.

GENERAL TARGETS ARE NOT HELPFUL, COURT SAYS

The court concurred with Shell that an absolute order to reduce Scope 3 emissions could be detrimental, potentially causing customers to switch from Shell's gas to more polluting coal. If Shell provided gas to a customer who moves away from coal, it might raise Shell's Scope 3 emissions while lowering overall emissions worldwide.

> "In general, any reduction in greenhouse gas emissions is positive to mitigate climate change," Joustra noted. "But that does not mean that a reduction order for Shell has that same effect."

NO SPECIFIC TARGET CAN BE SET

The court found it challenging to establish a suitable reduction target for oil and gas companies based on existing science and data.

> "The percentages mentioned in reports are so wide-ranging that a civil court cannot determine the reduction target to which Shell should be held," Joustra explained.

"Available data do not provide sufficient information to compel Shell to reduce emissions by a specific percentage by 2030."

REACTIONS

FRIENDS OF THE EARTH NETHERLANDS DIRECTOR DONALD POLS:
"This hurts. The judge did state that large companies such as Shell have a responsibility to respect human rights and reduce CO2 emissions according to international climate agreements. However, the judge did not specify a reduction percentage, leading to the decision against the claims."

SHELL CEO WAEL SAWAN:
"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. We are making substantial progress in our strategy to deliver more value with fewer emissions."

FRIENDS OF THE EARTH ACTIVIST NEELE BOELENS (23):
"To be honest, I was really disappointed. I was almost crying. Initially, it seemed promising for us, but then it declined. It's a setback for climate action. We will fight back and return stronger."

CITIGROUP ANALYSTS:
"Today's ruling from The Hague Appeals Court is, in our view, a best-case outcome for Shell. While success in the Appeals Court may not conclude the legal process, it signals that company strategy is increasingly in shareholders' hands, which we believe has a positive impact."