Shell’s legal win flags need for new green metrics
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, Nov 12 (Reuters Breakingviews) -Shell SHEL.L has struck a blow of sorts for Big Oil. The Dutch appeals court in the Hague has overturned a landmark 2021 ruling, which had compelled the $204 billion UK-listed group to cut its carbon emissions by 45% by 2030 compared to 2019 levels. Investors’ best response is to insist that drillers adhere to better green yardsticks.
In one sense, the court’s decision is a major setback for those who want to limit global warming to a manageable 1.5 degrees Celsius above pre-industrial times. The original ruling was held up by campaigners as a sign that institutions would shove companies towards net zero. The court of appeal took a different view on so-called Scope 3 emissions – those caused when customers burn oil companies’ product, which last year constituted the vast majority of Shell’s 1.2 billion tonnes of emissions. Broadly speaking, it found that it was hard to claim that cutting the company’s Scope 3 pollutants would necessarily help climate change, because rivals would step into the gap.
Unfortunately for net zero campaigners, scepticism about how to tackle Scope 3 emissions has not been limited to right-wing politicians or the companies themselves. The International Energy Agency last year pointed out that they were difficult to measure, and capable of being gamed. Shell is a case in point: while it cut both emissions from its own production and Scope 3 ones by close to 30% between 2019 and 2023, over 90% of the reductions came from divestments, Accela Research found. The ratio is 80% even for more transition-focused UK peer BP. That indeed just shoves the problem elsewhere.
Without rigid emissions reductions target, one risk is that oil groups get a free hand to pump what they want. Yet that’s not necessarily where things go. Investors should still fret that the IEA forecasts global oil demand will peak before 2030 even in its scenario based on current government policies. Exxon Mobil XOM.N CEO Darren Woods has called on U.S. President-elect Donald Trump to stick with the 2015 Paris climate agreement that marked the start of global buy-in for climate change action.
One metric that would better reflect this nuanced picture is how much Big Oil is spending on low-carbon technology, including carbon capture. Exxon, for example, has vowed to invest $20 billion through 2027 on low carbon technologies such as hydrogen. That measure is still capable of being gamed if drillers artfully sneak relatively less polluting fossil fuels like gas into their green buckets. But if the top five European oil groups including Shell, BP BP.L, TotalEnergies TTEF.PA, Eni ENI.MI and Equinor EQNR.OL spend $43 billion a year in renewables from 2024 to 2030 they would on average contribute 4% to 6% of the annual global investment needed in renewable power to achieve the path to 1.5 degrees Celsius, Accela estimates. Shell’s legal win should encourage investors to focus more on that.
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CONTEXT NEWS
The Dutch appeals court in The Hague on Nov. 12 dismissed a 2021 ruling that ordered Shell to cut its absolute carbon emissions by 45% by 2030 compared to 2019 levels, including those caused by the use of its products.
The court conceded Shell had a responsibility to reduce greenhouse gas emissions to protect people from global warming.
Friends of the Earth Netherlands, which brought the Dutch case in 2019, said it would continue its fight against large polluters, but did not say whether it would launch a further appeal at the Netherlands' Supreme Court.
Shell CEO Wael Sawan said in a statement Shell believed the decision was "the right one for the global energy transition, the Netherlands and our company".
Most of Big Oil's emissions cuts are via divestments https://reut.rs/3VbL7gH
Editing by George Hay and Streisand Neto
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