On November 12, 2024, the Dutch Court of Appeals in The Hague (Gerechtshof Den Haag) overturned a 2021 lower court decision that had ordered the energy company Royal Dutch Shell to reduce CO2 emissions by a net 45% by 2030. The lower court ruling marked the first time that a national court had ordered a private company to reduce its emissions to meet the targets of the Paris Climate Agreement. The appeals court held that even though Shell is required to reduce its CO2 emissions, it could not determine the exact percentage, and therefore dismissed the plaintiffs’ claims.
Facts of the Case
In 2021, the District Court in The Hague ordered Shell to reduce its group-wide CO2 emissions by 45% compared to 2019 levels by the end of 2030, a reduction in line with the goals of the Paris Climate Agreement. The case was brought by the environmental group Milieudefensie and other co-plaintiffs seeking a court order that Shell violated its duty of care by failing to reduce its emissions by 45%. They based their claim on an unwritten social standard of care laid down in book 6, section 162 of the Dutch Civil Code, which provides that acting in conflict with generally accepted social norms is unlawful. The plaintiffs argued the social duty of care required taking steps to meet the emission reduction goals in the Paris Agreement.
In finding in favor of the plaintiffs, the lower court cited the decision of the Dutch Supreme Court in Urgenda, a case holding that article 2 (right to life) and article 8 (right to a private and family life) of the European Convention on Human Rights (ECHR) imposed a duty on the Dutch government to take action against dangerous climate change. The court additionally referred to decisions of the UN Human Rights Committee that articles 6 (right to life) and 17 (right to a private and family life) of the International Covenant on Civil and Political Rights (ICCPR) likewise impose such a duty. The court also cited the UN Guiding Principles on Business and Human Rights, which despite their non-legally binding nature serve as suitable guidelines due to their “universally endorsed content.”
Shell filed an appeal to the ruling to the Dutch Court of Appeals in The Hague in August 2021.
Decision
The appeals court rejected the plaintiffs’ claims that Shell should be ordered to reduce its emissions by 45%, or by any other percentage. While Shell has a general obligation to limit its CO2 emissions to protect against climate change, there is no consensus in climate science on a specific reduction percentage with which an individual company like Shell must comply.
The appeals court agreed with the lower court that Shell has a general obligation to reduce emissions based on its duty to protect against dangerous climate change, derived from article 2 and article 8 of the ECHR. It considered the Dutch Supreme Court decision in Urgenda, the European Court of Human Rights’ ruling in Verein Klimaseniorinnen Schweiz v. Switzerland, and several judgements on climate change from foreign courts. It held that even though “it is primarily up to legislators and governments to take measures to minimise dangerous climate change . . . companies, including Shell, may also have a responsibility to take measures to counter dangerous climate change.” (Decision, para. 7.17.)
The court based this obligation on a legal doctrine, the indirect horizontal effect of human rights, which provides that while the duty to protect human rights primarily falls on the government, such rights can have an impact on private law relationships by giving substance to open standards, such as the social standard of care. Calling climate change the “greatest issue of our time,” the court stated that “[e]specially companies whose products have contributed to the creation of the climate problem and have it in their power to contribute to combating it are obliged to do so vis-à-vis other inhabitants of the earth, even when (public law) rules do not necessarily compel them to do so.” It concluded that Shell has an independent duty to achieve the goals of the Paris Climate Agreement. (Paras. 7.24-7.27.)
The appeals court rejected the claim that European Union (EU) climate legislation, such as the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive, or the EU emissions trading system, required Shell to reduce its emissions by a certain percentage. The EU does not impose absolute reduction obligations on companies, but rather incentivizes them to reduce their emissions through price incentives. “Beyond that, the companies are free to choose their own approach to reducing their emissions.” (Para. 7.56.)
Lastly, the court examined whether there was a scientific consensus on specific reduction standards for companies like Shell even in the absence of binding targets in climate legislation. It answered this question in the negative, holding that the 45% reduction standard or other standards do not apply to every country and every business sector individually and that there is no sectoral standard for oil and gas. Furthermore, it held that it could not be established that an obligation on Shell to reduce its scope 3 emissions—those generated from the use by downstream consumers of products supplied by the company—by a certain percentage would be effective, especially if this reduction could also be realized by Shell selling less fossil fuels, which could simply result in another company supplying them to end users. (Paras. 7.106, 7.111.)
Jenny Gesley, Law Library of Congress
December 10, 2024
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