2024-04-11 18:07:00
Shell’s large gray headquarters has been transformed into a face. In cartoon style it sucks on a chimney-cum-cigarette, black clouds puff out. Then the yellow smileys from Milieudefensie come to the rescue. They pull the cigarette from Shell’s mouth, stump it out, and the air clears. The message of the new campaign video from the climate activists – seen frequently in the past week – is clear: tackle the oil and gas company seriously and we will stop climate change.
Shell Netherlands boss Frans Everts has a completely different message, recently at WNL on Sunday. The judge’s ruling from 2021 would not be good for the climate at all. It states that Shell must reduce its entire emissions by 45 percent before 2030, including those of customers who buy gasoline or kerosene. In concrete terms, according to Everts, this means that Shell must sell half of its activities. “If we sell our gas stations to another company, customers will continue to fill up.” After all, the demand for gasoline from motorists is not decreasing.
Fall back on coal
During the appeal between Shell and Milieudefensie, with this Friday the last hearing day, the Shell lawyers are going one step further. The 2021 ruling would even be bad for the climate. Compared to many competitors, such as Exxon or Gazprom, Shell would operate relatively green. What if Shell sells gas fields to a party with less attention to climate? And Shell is mainly big in gas. What if Shell can supply less liquid gas to Asian countries, and they then fall back on coal, resulting in much more emissions?
It is the big question hanging over the most important climate lawsuit in the Netherlands. Of course: the case is groundbreaking from a legal perspective and raises important questions about companies’ climate obligations. But will the climate actually benefit if Shell has to drastically curtail its activities? Does the ruling lead to fewer CO emissions?2?
Professor of energy economics Machiel Mulder (University of Groningen) is skeptical. He understands Milieudefensie, he says. “Intuitively I would also say: it is good to tackle oil and gas companies. But if you look further at how the energy markets work, the ruling will have no effect.”
Demand for gasoline remains
Mulder previously conducted research on behalf of Shell into the effects of such a strong climate verdict on the global energy market. “This was scientifically independent research, where it was agreed in writing in advance that it would be published anyway, regardless of the outcome,” Mulder emphasizes.
Mulder’s research showed that if Shell withdraws from gas and oil extraction projects and filling stations, those activities will simply be taken over by other companies. “The demand for energy is high, and it is economically interesting.” Many of Shell’s oil and gas projects are collaborations with other companies – according to Mulder, another partner will be sought.
And if Shell stops production from a gas platform, this will not mean that gas will no longer be extracted here. “This is regulated worldwide through permits from governments. These determine whether oil and gas can be extracted. If Shell leaves, the government will look for another company that can operate there.” This is how it works in the Netherlands in the North Sea.
For this reason, Mulder is a strong supporter of climate lawsuits, provided they are brought against governments, and not against individual companies. “If a judge obliges a government to implement better climate policy, that can be very effective.” A government can influence demand. For example, through a European rule that bans the sale of fuel-burning cars from 2035, or by requiring the blending of sustainable fuels in aviation. According to Mulder, a drastic climate obligation to a single company does not change anything on the demand side, and therefore does nothing for the climate.
Is the Shell case the first domino?
René Peters, who has been researching the gas market for TNO for twenty years, agrees with Mulder’s analysis. “In the short term, the ruling will have little or no climate effect,” he says.
An argument that Milieudefensie counters this is that the ruling against Shell provides a ‘market signal’. It makes it clear to oil and gas companies that they have climate obligations and are at risk of lawsuits. Shell is a precedent; a first domino. Peters thinks this is ‘possibly’ correct, but he has his doubts.
Suppose judges in Europe impose similar obligations on companies such as BP, ENI and Total. Especially after the ruling of the European court this week, which confirmed that protection against climate change is a human right, these kinds of things are far from unthinkable.
Saudi Arabia’s state oil company will not be impressed by judgments in the EU, Peters suspects. “Saudi Aramco is now producing less oil than possible to keep the price high. If Shell says: we are going to produce one million fewer barrels per day, Aramco can say: ‘great, the market still demands 100 million barrels per day, then we will produce 1 million barrels more’.” The climate does not benefit from this – even with that precedent – says Peters.
Energy expert Jan Paul van Soest shares these concerns. According to Van Soest, this also applies to the other companies that Milieudefensie is targeting, such as Ahold, KLM and ING, against which it filed a second climate case. Even if those companies are obliged to halve their fossil activities, competitors will fill this gap, Van Soest thinks. While, according to Peters, these are the relatively sustainable players in their sector. “If ING no longer invests in oil and gas, it will be taken over by a player like BlackRock, which only focuses on returns and has no regard for the climate.”
Milieudefensie goes the extra mile
Milieudefensie also seems to be struggling with the question of whether a strict obligation to Shell will immediately benefit the climate. As a solution to undesirable consequences – that Shell simply sells on its fossil activities – the lawyers of Milieudefensie therefore came up with a new argument in the appeal. If Shell really adheres to the ruling, it should remove gas stations and gas fields from the market, and not sell them.
Although climate lawyer Tim Bleeker finds this a ‘legally interesting position’, he would not bet his money on the judge going that far. Van Soest, Peters and Mulder are more certain. “This is completely unrealistic,” says Van Soest. The judges are already under fire because, according to critics, they have taken too much of the place of the legislator. According to Van Soest, an even more far-reaching verdict than in 2021 is ‘complete fiction’.
Direct and indirect impact
So much for the skeptical experts. Transition professor Jan Rotmans thinks that economists like Mulder ‘don’t understand a thing’ about how real system change works, and that this is about much more than market forces. “The market is only one of eight ‘determinants’ that influence, along with geopolitics, policy, litigation pressure, consumer behavior, and so on.”
Purely from a market perspective, the previous experts have a point, says Rotmans. Those who are cynical can even agree with Shell’s argument that the ruling will have a bad effect on the climate in the short term. “But people overestimate the direct impact and underestimate the indirect impact.” If the verdict is ratified, the domino of the Shell case will lead to dozens of other cases, Rotmans says.
These in turn lead to a different perception among citizens and governments, which lead to policy adjustments, which the market responds to, and so on. According to Rotmans, this ultimately leads to a necessary step towards a more sustainable society. “In the long term – 10, 15 years – the Shell ruling will certainly have a positive effect on the climate.”
Climate lawyer Tim Bleeker (Vrije Universiteit) also thinks it is short-sighted to derive climate success purely from direct market analyses. “You have to look at the larger wave of climate issues.”
Bleeker saw around him what the ruling against Shell had in 2021. Companies worked on climate objectives. He himself was invited to training on climate obligations. The Shell case was used in drawing up new European duty of care rules for companies.
A duty is a duty
“The Shell ruling makes companies realize that climate policy is not optional, but that they are obliged to do so.” Bleeker also points out research of the London School of Economics which shows that climate cases against companies have a boosting effect on sustainability policy.
Yet the most important point that Bleeker wants to make is that it is not even that relevant for the high judges, who will soon have to brood over a ruling. effective which is for the climate. “Make an analogy with a major data breach. Suppose a company that is guilty of that privacy violation says: if we had not leaked your data, another company would have done so. That’s not a good argument.” In other words: the fact that others also do something wrong is not relevant to one person’s legal obligation to do the right thing.
Professor of macroeconomics Sweder van Wijnbergen also comes up with this point of view. He provided unpaid analyzes at the request of Milieudefensie. “Climate is a serious problem that is based on international treaties,” he says. “Countries must mainly make voluntary efforts, because the UN has no police. That is a fragile balance, where you don’t want companies to say: I’m just going to fight this head on until a government forces me.” According to Van Wijnbergen, Shell is guilty of this.
‘Shell opportunism is shocking’
According to him, the company acts as ‘free rider’. Someone who says, “I’m so small and have so little influence, it doesn’t matter what I do.” According to the professor, if all companies do this with impunity, the structure of the Paris Agreement will collapse, with disastrous consequences for the climate. A ruling against Shell is a signal, he says: companies must make every effort to keep the maximum 1.5 degrees of warming within reach.
Van Wijnbergen also questions the credibility of Shell’s own climate argument. On the one hand, the company says: the energy market is so large, complex and strong that the ruling has no effect whatsoever on global supply and demand, and therefore also on the climate. At the same time, Shell repeatedly argues that this ruling endangers the affordability and security of supply of fossil fuels. “That opportunism is shocking. On the one hand, saying: we have no effect whatsoever, and on the other hand: dramatic things will happen if we adhere to the verdict.”
According to the economist, this makes it a guess as to what Shell really thinks. Is the ruling a disaster, a victory or an insignificant fart for the climate? Bleeker also doesn’t know what Shell thinks about this. He thinks the company is simply “using every possible argument to get the verdict thrown out.”
Listen also: How Shell neatly reduces its emissions, but also continues to pollute
Also read:
Shell vs. Milieudefensie: neither wants a compromise on the crucial 45 percent
On days two and three of their appeal, Shell and the climate activists fiercely battle each other. One of the hottest issues: the crucial 45 percent by which Shell must reduce its total emissions by 2030, according to the judge’s ruling in 2021.
Seven questions about the top legal duel between Milieudefensie and Shell
Shell must drastically reduce its emissions, the judge ruled in 2021. A preliminary discussion of the appeal with the Netherlands’ most important climate law analysts.
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