London (CNN Business)A Dutch court has ruled that Royal Dutch Shell must dramatically reduce its carbon emissions in a landmark climate decision that could have far reaching consequences for oil companies.
The company must slash its CO2 emissions by 45% by 2030 from 2019 levels, according to a judgment from a district court in The Hague on Wednesday. That includes emissions from its own operations and from the energy products it sells.
This is the first time that a court has ruled a company needs to reduce its emissions in line with global climate goals, according to Friends of the Earth Netherlands, an environmental campaigning group that brought the case against Shell (RDSA).
The verdict could pave the way for similar cases to be brought in other countries, forcing oil companies to reduce fossil fuel production. It comes just a week after the influential International Energy Agency told oil companies they need to stop drilling for oil and gas right now to prevent a climate catastrophe.
The Anglo-Dutch company announced plans in September to become a net zero emissions company by 2050, a target that includes emissions from its products. It is currently targeting a 20% reduction in carbon intensity by 2030, and 45% by 2035.
“This is a turning point in history,” said Roger Cox, lawyer for Friends of the Earth Netherlands.
“This case is unique because it is the first time a judge has ordered a large polluting corporation to comply with the Paris Climate Agreement. This ruling may also have major consequences for other big polluters,” added Cox.
The impact of the decision will be amplified because the court relied on global human rights standards and international instruments on climate change in arriving at its decision, according to legal experts.
“I can imagine this will inspire a series of other cases against companies, especially those active in the oil extraction industries like Shell,” said Eric De Brabandere, a professor of international dispute settlement at Leiden University in the Netherlands. “It is a groundbreaking decision, it’s really a landmark.”
While Shell claims that its carbon intensity targets are aligned with the Paris Agreement — which aims to limit global temperature increases to 1.5 degrees Celsius — Friends of the Earth Netherlands argues that the company’s ongoing investments into oil and gas extraction show that it doesn’t take climate change seriously.
The court found that Shell’s carbon emissions pose a “very serious threat” to Dutch residents, and that the company has an “individual responsibility” to reduce emissions. The court said the company would have “total freedom” to comply with its order and to shape corporate policy.
Shell indicated it would appeal the ruling, which is immediately enforceable, according to De Brabandere.
“We are investing billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels. We want to grow demand for these products and scale up our new energy businesses even more quickly. We will continue to focus on these efforts and fully expect to appeal today’s disappointing court decision,” a Shell spokesperson said in a statement.
Oil companies are facing mounting pressure from shareholders and activists to ditch fossil fuels and invest into cleaner energy sources. The ruling handed down on Wednesday “may sound revolutionary, but, in fact, it is in line with what long term investors are increasingly asking companies to do anyway,” said Cees van Dam, a professor of international business and human rights at the Rotterdam School of Management.
At its annual meeting on Wednesday, ExxonMobil (XOM) will face a challenge from activist investor Engine No. 1, which is seeking to replace almost a third of the company’s board to try and force it to move more quickly on climate change. Also on Wednesday, shareholders will vote on emissions reductions targets at Chevron’s (CVX) annual meeting.
“Shell is the first but will not be the last company that will be forced to stop dangerous climate change,” Friends of the Earth Netherlands director Donald Pols told reporters on Wednesday. “As of today climate lawsuits are a material risk for all major polluters in the world,” he added.
This is the third recent case Shell has lost involving the environment. In February, the UK Supreme Court ruled that thousands of Nigerians can sue Shell in English courts over environmental damage. In January, a Dutch court ordered Shell’s Nigeria unit to compensate locals for oil pipeline leaks that took place more than a decade ago.
— Julia Horowitz contributed reporting.
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