Shell escapes duty to reduce emissions (for now)
Cornerstone Climate, Planning and Environment
By Michael Bedford KC
In an important case decided by The Hague District Court in May 2021, that Court had held, in a claim brought by Milieudefensie (Friends of the Earth Netherlands), Greenpeace Nederland and others, that Shell was under a legal obligation to reduce its CO2 emissions by 45% by 2030 relative to 2019 levels. This ruling applied not just to Shell’s activities in the Netherlands but also to its activities worldwide, and included also the downstream Scope 3 emissions from those activities (i.e. the CO2 emissions once Shell’s customers used (burnt) the oil, gas, and other fuel products that Shell had supplied to them). The ramifications were clearly enormous for one of the largest oil and gas companies in the world.
Shell appealed and, on 12 November 2024, The Hague Court of Appeal issued its decision in Shell plc & Stichting Milieu en Mens v Vereniging Millieudefensie & others (ECLI:NL:GHDHA: 2024:2100). The Court of Appeal reversed the decision of the lower court. However, it did so on the narrow ground that, notwithstanding that Shell owed a legal duty to reduce its emissions, which was directly enforceable by representative groups such as the claimants, that duty was only to reduce its emissions by an appropriate amount and the Court was not able to say whether that should be by 45% or by any other amount. The Court also concluded that it could not be shown that even if Shell reduced its Scope 3 emissions by reducing its sales to customers, that would necessarily result in a net reduction in CO2 emissions, because there was no evidence that those customers would not simply buy from another supplier (or even buy a more polluting fuel such as coal, which Shell did not supply).
An important point to note from the decision is that the Court of Appeal also found that Shell was under a legal obligation to reduce its Scope 1 and Scope 2 emissions but, given Shell’s own published plans to reduce those emissions by amounts which exceeded any relevant targets, it could not be said there was any current breach of that obligation. Of course, this finding opens the door to future challenges in the Dutch courts as regards those Scope 1 and Scope 2 emissions if Shell does not achieve its self-selected emission reduction targets in line with its published plans.
For non-Dutch lawyers, a key issue is the juridical source of the legal obligation that the Court of Appeal found that Shell, as a private company, owed to Dutch citizens to reduce its CO2 emissions. The Court of Appeal reviewed the obligations arising under the European Convention on Human Rights (Articles 2 and 8) and found that, in the context of climate change, those obligations could have indirect horizontal effect so that citizens could enforce them against private companies. The basis for this was that climate change was ‘the greatest issue of our time’, it posed a danger and would damage the rights protected by Articles 2 (life) and 8 (private and family life), and that everyone, but especially companies whose products contribute to climate change effects and which had the power to combat those effects, was obliged to do so. This finding was based on an unwritten social standard of care owed by Shell, notwithstanding that there was no specific legislation by which the state had mandated that private companies should take such action. However, the Court of Appeal decision is elusive on the source of this unwritten social standard of care as a matter of legal obligation. Whilst unwritten legal principles can exist, there may be some nervousness by most lawyers who hold dear to the rule of law about concepts that are unstated, undefined, and (potentially) unlimited being found to impose binding legal obligations affecting not merely states but private entities within states. There may well be questions about whether judges in a common law jurisdiction considering whether there was any breach of Articles 2 and 8 by reasons of a company’s CO2 emissions would accept that the company was under a binding legal obligation to reduce its emissions.
The Court of Appeal also reviewed the applicability of European Union law on climate change (much of which remains applicable in the UK in our post-Brexit legal landscape). The Court rejected an argument advanced by Shell that that legislation, which did not impose emissions reduction targets on individual companies, was exhaustive of what a company was required to do. The Court accepted that EU law imposed no company specific reduction targets but found that this did not preclude a duty derived from the unwritten social standard of care, albeit it could be relevant to the extent of that duty. This finding did not, however, further elucidate the legal source of that apparent duty.
The key takeaways of the Court of Appeal decision are that (a) there is unfinished business here with regard to Articles 2 and 8 of the ECHR and whether they can provide a basis for indirect horizonal effect in the context of climate change, (b) Shell is at risk of further challenges on Scope 1 and Scope 2 emissions if it does not live up to its published plans for emission reductions, and (c) there may be testing times ahead if the concept of an unwritten social standard of care as a source of legal obligations is to be given traction by courts in other jurisdictions.
- Michael Bedford KC’s practice covers all areas of town and country planning, local government law, judicial review, environmental law, infrastructure, highways, and compulsory purchase. Learn more about his work here.
