Published: 22/07/2021

In a landmark climate ruling, a Dutch court has ordered Shell to expediate its emission target. Instead of reducing 20% by 2030, as the company had planned, the court ruled that Shell should slash emissions 45% by 2030. The ruling marks a first in global climate litigation which could trigger a wave of litigation against some of the world’s biggest polluters while also demonstrating the consequences of inaction on climate change. 

The case was brought by seven climate activist groups including Greenpeace and Friends of the Earth Netherlands (also known as Milieudefensie) and was filed on behalf of more than 17,000 Dutch citizens. They alleged that Shell had violated human rights through the products it sells, namely oil and gas, which were directly culpable for climate change. Despite Shell’s plans to transition its business to net-zero emissions, the lawyers for the plaintiffs argued that the company had been aware of the dangerous consequences of CO2 emissions for decades and that its targets were insufficient. The court rejected the company’s arguments that not selling these products would result in others selling the same, or that the responsibility lies with consumers rather than fossil fuel companies. 

Shareholder votes have also marked changes for two other major oil companies – Chevron and ExxonMobil – with the former receiving 61% of investor support for the company’s more aggressive target to cut CO2 emissions from the oil and gas it sells by 35% by 2028. Separately, Exxon shareholders successfully voted in two climate-focused shareholders to the board. One of the new board members is Kaisa Hietala, who previously helped lead oil refining company Neste’s venture into renewable energy products. The hope is that the two new appointees will be able to sway the other 12-member board of directors to direct Exxon to do business differently. 

The International Energy Agency released a report calling for a total cessation of exploration for new fossil fuels and a stop to new fossil fuel infrastructure, along with the retirement of all coal-fired power station in advanced economics by 2030, and across the world by 2040. These changes indicate a major shift for global oil and gas companies.

Companies must now choose where and how to compete as the world transitions to a low-carbon future. It is no easy task, but a few businesses have successfully done it. One example is Ørsted, a Danish energy company which predominantly earned revenue from selling energy sourced from coal. The group made a major strategic shift in 2009 and invested aggressively in offshore wind while phasing out coal. Now its target is to generate 85% of heat and power from renewable sources by 2040. 

Another is Neste, a Finnish energy company which shifted its historical asset base from oil refining and marketing toward processing biofuels. Meanwhile, Australia’s largest petroleum company Ampol has declared its intent to transition away from traditional oil-based fuels, and is teaming up with Ireland’s Fusion Fuel to develop a solar-powered hydrogen production plant at its oil refinery in Queensland. The company’s renewable strategy includes plans to use 50% equivalent net renewables by 2030 and to reach net-zero carbon emissions at its operations by 2040.

The timing for a decarbonisation roadmap could not be better, given the demand slump as a result of the coronavirus lockdowns and ongoing oil price war. According to an energy research consultant, Wood Mackenzie, the lucrative returns on oil and gas exploration projects have plunged to the point where they are almost now in line with returns from solar and wind projects. 

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