On appeal, the Court of Appeal in The Hague rejected the claim by Milieudefensie (Friends of the Earth) that Shell must reduce its carbon emissions by 45 per cent by 2030 as compared to 2019. With Danny Busch, professor of financial law at Radboud University, we dig a little deeper into the ruling and what its implications are.
In 2021, the court had still upheld the claim by Milieudefensie and others. This meant that Shell would have to reduce its direct emissions (Scope 1), indirect emissions (Scope 2) and indirect emissions in the value chain (Scope 3) by 45 per cent (2030 compared to 2019). A historic ruling, as it was the first time such a climate case had been brought against a company. However, Shell appealed, which, on November 12, 2024 resulted in the court reversing the earlier ruling.
How did the court arrive at this ruling?
Busch: “The statement actually rests on two pillars. First, for a company like Shell, the vast majority of its emissions fall under Scope 3. All emissions from the fuel that is put in vehicles and consumed at Shell are part of this category, and that is what this case is mainly about. The court has now said that 45 percent emissions reduction is a global average for companies and whether that percentage is appropriate for a company like Shell remains to be seen. The Court then turned to the question of what would be an appropriate percentage for Shell. There were all kinds of reports on that in the proceedings before the Hague Court of Appeal, which pointed in different directions. Therefore, the court said: if the scholars disagree on this, you cannot expect us as a civil court to order Shell to reduce those emissions by x percentage.
The second pillar of the ruling, and in that the court was quite strict, is that it said: if we impose an obligation on Shell to also reduce Scope 3 emissions by a certain percentage, we must be more or less certain that this will reduce global emissions on balance. That is not entirely clear, because other parties probably fill the gap when Shell sells gas stations, for example. Those are bought by a competitor and then on balance the world is not better off.”
This judgment can still be appealed to the Supreme Court. How likely is it that the Supreme Court will overturn the court’s decision?
“The court does not deny that companies have their own responsibility to combat climate change as much as possible. They have that duty of care, according to the Court. But purely on factual grounds, the claim cannot be allowed, because there is no clarity on what an appropriate reduction percentage would be for Shell. That narrows the playing field for the Supreme Court, because it is only concerned with whether the law has been properly applied and whether the judgment is sufficiently clearly reasoned. Well, I’m sure the former was done here. All the Supreme Court can do then is assess whether the Court’s ruling is sufficiently clearly reasoned. If that is not the case, the ruling may fail and then the case is referred to another court, in Amsterdam, for example. That court would then have to retry the appeal in this case.”
Is this ruling a dark day for the climate?
“It is a very nuanced ruling and, in some ways, it actually encourages parties like Milieudefensie. Although the claims were not granted, the court did recognize that dangerous climate change constitutes a violation of human rights. And that as a company, you have an obligation and responsibility under the standard of care to ensure that dangerous climate change remains as small as possible. In that sense, important steps have been taken. Moreover, the Court ruled that Shell is taking sufficient steps in terms of Scope 1 and 2 emissions. And that for these categories there is no real threat of Shell violating the duty of care. In Shell’s case, an environmental organization will not win that battle, because the lion’s share of its emissions fall under Scope 3. But it does provide an opportunity to address companies that are not on track in terms of Scope 1 and 2. Certainly for companies with the bulk of their emissions falling into these categories, this does put a spanner in the works. For Milieudefensie, this may mean going after other companies.”
Will the success rate - from the plaintiff’s perspective - for this type of claim increase when there is greater consensus among experts on appropriate reduction rates for individual companies?
“I would say so, yes. And I wouldn’t be surprised to see more standardization in this area in the near future. I certainly wouldn’t rule out the possibility that in, say, five years or so we will have a lot more to say about it.”
But for the time being, environmental organizations are left with empty hands.
“If you go along with the Hague court’s reasoning, it turns out to be quite difficult to get ‘Scope 3 claims’ awarded. But I’m not sure that’s the most important thing in this kind of litigation. Because you can at least conclude that these kinds of cases will increase the pressure in boardrooms to do more in terms of emissions reduction. So, from that perspective, Milieudefensie and others should just keep doing this kind of litigation. Regardless of how likely they are to win.”