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.
The verdict could pave the way for similar cases to be brought in other countries, holding oil companies liable for greenhouse gas emissions from fossil fuels.
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.
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.
Shell indicated it would appeal the ruling.
"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 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.
At its annual meeting on Wednesday, ExxonMobil 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 reduction targets at Chevron's annual meeting.
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.
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