Summary 

In a landmark 2021 ruling, Milieudefensie v Shell, the Hague District Court ordered Shell to reduce its CO2 emissions by 45% by 2030 relative to 2019 levels across all scopes. On 12 November 2024, in its long-awaited judgment, the Hague Court of Appeal ruled that, while Shell has a legal duty to “counter dangerous climate change” and reduce emissions, specific reduction requirements, particularly in relation to Scope 3, are not legally enforceable. Accordingly, the 2021 decision was overturned; although Shell has a legal obligation to reduce its emissions, the rate of emissions reduction – and by proxy Shell’s decarbonisation – cannot be specified or imposed by a Court. 

The 2021 ruling inspired similar climate cases around Europe which are making their way to trial. What are the implications of this new Court of Appeal judgment? 

Let us first look at the background and the two court decisions in more detail.

Procedural History 

The 2021 decision of the Hague District Court was regarded as a watershed moment in climate litigation. The claim was filed in 2019 by Milieudefensie (the Dutch branch of environmental NGO Friends of the Earth), six NGOs, and more than 17,000 Dutch citizens. The District Court decision was handed down on 26 May 2021 in favour of the plaintiffs. 

As well as being the first judgment to order a corporation to reduce emissions across its entire value chain, including emissions from the burning and use of fossil fuels by Shell’s customers (known as ‘Scope 3’ or downstream emissions), which account for 90% of Shell’s total emissions, the 2021 decision found for the first time that a corporation owes a legal duty of care to citizens under international law to prevent dangerous climate change through its policies and to reduce GHG emissions. The first instance judge found that this corporate duty of care was established under Dutch tort law (in particular on Article 6:162 of the Dutch Civil Code) as informed by Articles 2 and 8 of the European Convention on Human Rights (ECHR) and ‘soft law’ instruments such as the UN Guiding Principles on Business and Human Rights, the OECD Guidelines, and other frameworks that stress the need for businesses to prevent human rights violations in their operations, including those linked to environmental harm. The District Court concluded that this duty of care required Shell to take responsibility for its Scope 3 emissions, especially "where these emissions form the majority of a company’s CO2 emissions, as is the case for companies that produce and sell fossil fuels" [4.4.19], and so ordered Shell to slash its emissions by 45% across all Scopes by 2030, relative to 2019 levels. 

Shell challenged the 2021 decision in July 2022, relying on ten grounds of appeal. Oral appeal hearings took place in April 2024. 

Appeal Decision

On 12 November 2024, the Court of Appeal dismissed Milieudefensie’s claims against Shell, overturned the landmark 2021 decision, and ordered the Milieudefensie to pay Shell’s legal costs [8-9]. 

This outcome represents another major victory for the oil and gas producer this year, after an action seeking to hold Shell’s directors personally liable for allegedly mismanaging climate risk was ultimately dismissed by the UK Court of Appeal in February 2024. 

However, the judgment was far from a complete reversal of the 2021 decision. The Court of Appeal rejected many of Shell’s foundational arguments and provided important guidance regarding the responsibility of multinational companies for their contributions to climate change – in so doing, leaving the door ajar for future litigation. 

Key findings are summarised below: 

1. Shell has a “special responsibility” and “major obligations” to reduce emissions, but no express obligation to reduce emissions by 45% 

The Court found that “companies like Shell, which contribute significantly to the climate problem and have it within their power to contribute to combating it, have an obligation to limit CO2 emissions in order to counter dangerous climate change, even if this obligation is not explicitly laid down in (public law) regulations of the countries in which the company operates. Companies like Shell thus have their own responsibility in achieving the targets of the Paris Agreement” [7.27; see also 7.79]. 

The Court confirmed that Shell has a “special responsibility” as a major producer of fossil fuels to prevent dangerous climate change [7.79] and found that its obligation to reduce emissions arises under a social duty of care as well as various EU regulations (both discussed below) [7.56-7.57]. However, the Court found that “it does not automatically follow from such a ‘general’ obligation” that Shell must be ordered to reduce emissions by 45% [7.57], and rejected Milieudefensie’s claim that Shell was legally required to reduce emissions across all Scopes by 45% (or any other percentage) by 2030 relative to 2019 levels [7.56]. The 45% rate was based primarily on general scientific consensus (in particular scientific reports from the IPCCC and the IEA) that global emissions must reduce by 45% to limit global warming to 1.5C [3.9; 3.11; 4.3; 7.69].

2. Scope 1 and 2 Claims declared moot. 

The Court of Appeal implicitly confirmed that Shell has a legal obligation to reduce Scope 1 and 2 emissions (which make up 10% of Shell’s total emissions), but found that, in practice, these claims were obsolete because Shell had already set emission reduction targets for Scopes 1 and 2 emissions that exceeded the 45% demanded (Shell has committed to reduce Scope 1 and Scope 2 by 50%), and was on track to meet this target, having reduced Scope 1 and 2 emissions by 31% between 2016-2013. As such, there was no impending violation of a legal obligation, and no need for the court to order any specific percentage of emissions reductions at this stage [7.66].

3. Scope 3 Claim rejected. 

The Court of Appeal found that “Shell may have obligations to reduce its scope 3 emissions” [7.111] and its reasoning implies that Scope 3 emissions (which make up 90% of Shell’s emissions) are part of Shell’s emissions reduction obligation. However, the obligation for Shell to reduce Scope 3 emissions by 45% (or any other specific percentage) was rejected on two main grounds. 

First, the Court reviewed scientific and expert evidence and concluded that there is (currently) no established sectoral pathway for emissions reduction in the oil and gas sector that could justify holding Shell to the 45% Scope 3 emissions reduction requirement [7.73; 7.81]: “Shell cannot be bound by a 45% reduction standard (or any other percentage) agreed by climate science because this percentage does not apply to every country and every business sector individually.” [7.111].

The Court found that the 45% reduction target was too generic to be legally enforceable and that it could not impose this rate on Shell without a clear and detailed legal and scientific analysis as to why this percentage relates to Shell’s portfolio, which Milieudefensie had not advanced. The Court of Appeal held that “however much Shell may be required to do its part in combating dangerous climate change, the available [scientific] figures do not provide the court with sufficient certainty to oblige Shell to reduce its CO2 emissions by a certain percentage by 2030” [7.96]. 

Second, the Court of Appeal questioned the effectiveness of imposing a court-mandated Scope 3 emissions reduction obligation in circumstances where another company would simply replace Shell if it were to stop selling fossil fuels [see 7.97 et seq]. Agreeing in part with Shell, the Court found that, on the supply side, reducing the sale of fossil fuels may only partially contribute to reductions in Scope 3 emissions because, “in that scenario, the specific company would only disappear from the value chain and the (already produced) fossil fuels would still reach the consumer via another intermediary” [7.106], meaning there would be minimal change to global emissions. As an aside, the Court of Appeal noted that there may be a stronger causal relationship between limiting the production of fossil fuels and emissions reductions, but this argument was not put forward sufficiently.

However, on the demand side, the Court of Appeal dismissed Shell’s claims that it has limited control over the demand for fossil fuels, that it cannot take responsibility for the decisions of end-users over which energy sources to use, that it is “not acting unlawfully as long as its supply responds to the demand for fossil fuels”, and that “assuming a responsibility for Shell with regard to scope 3, effectively means that it is liable for (lawful) acts of third parties (its customers)” [7.98]. The Court of Appeal dismissed this in short shift – “this argument does not hold water” [7.99] – arguing that several EU laws and regulations (including the CSRD, CS3D and OECD Guidelines) “presuppose corporate responsibility for scope 3 emissions” (see more on this below). 

4. Corporate Duty of Care 

Finding that “there can be no doubt that protection from dangerous climate change is a human right” [7.17], the Court of Appeal held Shell has a responsibility to protect citizens from dangerous impacts of climate change resulting from its business activities. Although companies like Shell are not direct parties to international human rights treaties, certain human rights and social due diligence obligations extend to companies [7.55]. This is consistent with the 2021 decision. 

5. New coal, oil and gas infrastructure 

On the topic of new investments in oil and gas and scope 3 emissions, the Court of Appeal found it “plausible” that cutting emissions by 2030 will “require not only taking measures to reduce demand for fossil fuels, but also limiting the supply of fossil fuels. The social standard of care, interpreted on the basis of Articles 2 and 8 ECHR and soft law such as the UNGP and OECD guidelines, requires producers of fossil fuels to take their responsibility in this respect. It is reasonable to expect oil and gas companies to take into account the negative consequences of a further expansion of the supply of fossil fuels for the energy transition also when investing in the production of fossil fuels. Shell’s planned investments in new oil and gas fields may be at odds with this” [7.61] (emphasis added). 

Furthermore, the Court confirmed the expectation that “oil and gas companies […] take into account the negative consequences for the energy transition when investing in new oil and gas fields” [7.62]. 

Since the appeal did not require the Court to specifically consider whether Shell’s planned new investments in oil and gas fields violated Shell’s corporate social duty of care, the Court could not make a definitive finding on this issue. However, the finding that new oil and gas expansion “may be” incompatible with the energy transition leaves the door open for future claims. 

6. EU Legislative Context – the significance of CSRD and CS3D

A raft of EU climate legislation, in particular the European Green New Deal, the Fit for 55 package, the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D), came into force after the 2021 decision was handed down. The Court of Appeal noted that the CSRD and CS3Drequire Shell to prepare a climate transition plan that is consistent with the European Union's climate objectives that includes time bound targets and absolute reduction targets “where appropriate” [7.40, 7.44, 7.45, 7.50]. Further, the Court stated that “The European rules also envisage that customers of Shell will start contributing to the European Union’s emission reduction targets by having additional measures in place to reduce CO2 emissions and promote low-carbon energy products” [7.50]. 

The Court of Appeal rejected Shell’s argument that an obligation on individual companies to reduce their CO2 emissions is not in keeping with the system of these new EU laws: “The measures taken by the legislator to reduce CO2 emissions are not exhaustive in and of themselves … obligations arising from existing regulations do not preclude a duty of care based on the social standard of care on the part of individual companies to reduce their CO2 emissions” [7.53]. 

Although the CSRD and CS3D do not impose a specific 45% emissions reduction requirement on individual companies, they require in-scope companies (including Shell) to put in place and implement a transition plan aligned with the Paris Agreement and consistent with the EU’s climate objectives of reducing GHG emissions by 55% by 2030 [7.46, 7.53, 7.54]. This may involve Shell reducing emissions by 45% across all Scopes by 2030, but this has not been expressly required by the EU lawmakers or the judgment. 

What’s next? 

Yesterday’s decision seems unlikely to be the end of the road for this claim. Milieudefensie has three months to file an appeal to Dutch Supreme Court, and if it does so a decision might be handed down in 2027.

Broader implications of the decision

Th Court of Appeal has reaffirmed the principle that companies are bound to contribute to the mitigation of climate change in line with the emissions reduction goals of the Paris Agreement. At the same time the ruling stops short of mandating specific percentage reductions, giving Dutch companies a broad discretion as to how they approach that task in their climate transition plans. A challenge for claimants in similar cases against other companies will be to satisfy the court that there is an objective standard for assessing whether a company’s reduction targets are compliant with a rights-based duty of care. 

Finally, and in any event, the decision does not impact European companies’ obligations under European legislation, particularly the CS3D, which will require them to adopt and put into effect a Paris Agreement-aligned transition plan that includes Scope 3 emissions reduction targets and no further investments in new oil and gas fields.