Royal Dutch Shell : Shell Got Bitten By The Paris Agreement On Climate Change

The Paris Agreement has been criticized for not imposing legally binding greenhouse gas emissions targets on countries, but that needn't mean it's toothless as the Hague District Court has demonstrated in the climate lawsuit opposing  Milieudefensie et al vs. Royal Dutch Shell Plc.

On May 26, 2021, in a groundbreaking judgement, the Hague District Court has ordered Royal Dutch Shell Plc (''RDS'') to reduce the Shell group's (RDS and the other Shell companies) Scope 1 through 3 CO₂ absolute emissions with 45% by 2030 compared to its emissions in 2019. A 45% reduction by 2030 is the standardized pathway of the Intergovernmental Panel on Climate Change ("IPCC") to limiting the global temperature rise to 1.5°C by 2100.

This is the first time that a court order has been granted against a private company obliging it to reduce its aggregated and absolute CO₂ emissions by a fixed percentage within a defined timeframe. According to the Court, RDS' solely intensity-based CO₂ emissions reduction target is unlikely to achieve the climate goals of the Paris Agreement on Climate Change ("PA"). The Court adds that RDS' imminent violation of its reduction obligation does not in itself imply that RDS' current CO₂  emissions are unlawful. The verdict is provisionally enforceable and will take direct effect even if RDS appeals the decision.

This decision builds on the landmark Urgenda  decision of 2019 which found that the Dutch government's inadequate action on climate change violated a duty of care to its citizens under Article 6:162 of the Dutch Civil Code. In the suit against RDS, plaintiffs have successfully extended the open standard of care further coloured in and specified by the climate goals of the PA, scientific evidence on the dangers of climate change of the IPCC and human rights principles of the UN Guiding Principles on Business and Human Rights ("UNGPs") and the European Convention for Human Rights ("ECHR").

While this judgment is primarily of interest for all companies incorporated in the Netherlands, the enforceability of the PA's climate goals and human rights principles of the UNGPs and ECHR against RDS is likely to have far-reaching consequences beyond the Netherlands and RDS. The judgement echoes a recent investigation conducted by the Commission on Human Rights of the Philippines which concluded that climate change constitutes an emergency situation that demands urgent action and 47 major fossil fuel companies, including Shell, could be liable for human rights violations arising from climate change.

From West to East, climate change is increasingly understood as an issue that entails responsibility from all organs of society, including businesses and human rights is one of the tools being picked up to hold companies accountable for their contribution to climate change. Although it will take time before the Dutch Supreme Court gives a final judgment on this matter, this decision sends a strong signal to companies to reassess their climate change policies, align their CO₂ emission reduction targets and pathways to the PA and IPCC, manage greenwashing risks and select best suited technologies to reduce CO₂ emission since the Hague Court has made reservation against negative emission strategies based on Carbon Capture and Storage technologies.

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Mr Fabrice Mattei
Rouse
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