By Samuel Furfari

On November 12th, the Court of Appeals in The Hague handed down a historic judgment, rejecting climate activists’ demands that Shell drastically reduce its carbon emissions. The decision marks a major turning point in the balance between climate policy and humanity’s basic energy needs, and sets an important precedent for the future of climate litigation. At the heart of the debate is a crucial question: can a private company be legally forced to change its business strategy in the name of fighting climate change? The answer from the Dutch judges is clear: no.

Citizens do not need to dictate goals to companies

Based on strong legal arguments, the Court of Appeals ruled in Shell’s favour. The oil company challenged the legitimacy of the emission reduction targets imposed on it by the lower courts. In particular, it made two main arguments, which were accepted by the Court:

·      Lack of legal basis: The company argued that the courts did not have the legal authority to impose such emission targets, let alone quantify them. In particular, the court emphasised that it is the responsibility of the states, not private companies, to set targets for reducing CO2 emissions.

·      The ineffectiveness of the measure: Shell argued that these imposed targets were not an effective way to achieve its own goal of carbon neutrality by 2050. On the contrary, the company argued that these constraints could prove counterproductive.

In upholding these arguments, the Court of Appeals overturned the previous decision and ruled in Shell’s favour. This decision calls into question the ability of courts to impose climate change targets directly on private companies. This fundamental distinction between public and private responsibility is an essential principle of law that cannot be challenged by those who claim there is a climate emergency, no matter how urgent.

We can’t do without oil as activists claim

As Azerbaijan’s President Ilham Aliyev stressed at the opening of the ongoing COP29 in Baku, hydrocarbons remain indispensable to meeting the basic needs of humanity. This statement, coming from the host country of a major climate conference, perfectly illustrates the paradox we face. Fossil fuels still account for more than 80% of the global energy mix, while global energy demand continues to grow, especially in emerging economies. Renewable energy is growing, but five times slower in developing countries. Energy security, often overlooked in the climate debate, is once again at the forefront of international concerns, as it was already the case at COP28 in Dubai. Recent geopolitical crises, particularly in Europe with the war in Ukraine, have highlighted the strategic importance of reliable and diversified energy supplies. In this context, Shell and the other oil majors have a crucial role to play in maintaining stable production capacity and investing in new, more efficient production technologies.

Make Oil Great Again

The political evolution in the United States, with the imminent return of Donald Trump to the presidency, illustrates a major paradigm shift. His promise to significantly expand US hydrocarbon production reflects a broader trend of prioritising energy independence over climate goals. This ‘America First’ approach to energy will have significant global implications for energy markets. The complete replacement of hydrocarbons faces significant technical barriers. The intermittency of renewables requires storage solutions that do not exist for the industrial-scale power generation; the battery life of your smartphone should give you an idea of the scale of the challenge. The materials needed for green technologies pose their own environmental and geopolitical challenges. The cost of the transition infrastructure is a colossal investment that not all countries can afford. Sectors such as aviation, shipping and heavy industry simply do not yet have viable alternatives.

The recent European experience offers valuable lessons. The energy crisis of 2022–2023 demonstrated the vulnerability of a precipitous energy transition and the strategic importance of maintaining diversified energy sources. It also highlighted the social and political risk of a sharp increase in energy prices, arguing for a pragmatic rather than an ideological approach. Mario Draghi also underlined this risk and the need for a pragmatic approach in his report, in which he cautiously condemned the EU’s loss of competitiveness due to energy prices as a result of an energy policy subordinated to climate policy.

Shell and the other oil majors are not only producers of hydrocarbons, they are also key players in making the world work. They are investing heavily in research and development to make the exploration and production of hydrocarbons more efficient. They know they are being watched and do not want to end up on the front page of the newspapers, but being efficient also means having better economic profitability.

The ruling is part of a broader geopolitical context marked by the rise of the BRICS countries, which are only thinking about economic growth and competition for strategic resources, far from the concerns of EU politicians and Dutch activists.

If The Hague decision thus marks a major turning point in the legal and political approach to energy transition, it must be an opportunity to raise awareness that the world cannot be led by activists, but by the search for the well-being of eight billion people. The starting point is abundant and affordable energy for all.

This commentary was first published at Contrepoints on November 19, 2024.

Samuel Furfari is a member of the CO2 Coalition, a chemical engineer, a professor of geopolitics and energy policy at the ESCP, and is the author of numerous articles and 18 books on energy and sustainable development.