By Emrys Yamanishi
In March of 2022, ClientEarth, an environmental law firm and shareholder with the gasoline company Shell, filed a lawsuit against Shell under the Companies Act 172 and 174, positing that the company was “failing to implement an energy transition that aligns with” the Paris Agreement. Garnering support from several other Shell shareholders including Nest, London CIV, AP3, Sanso IS, and Danske Bank Asset Management, ClientEarth called Shell out for failing to act in a way which it believes will obtain Shell’s commitment to becoming a net-zero company by 2050. Although the lawsuit was filed almost a year ago, Shell has continued to stall ClientEarth in court. Notably, this isn’t the first time that Shell has come under legal fire for failing to adhere to their climate promises. In May of 2021, Royal Dutch Shell plc was ordered by a Dutch Court to reduce its emissions by 45% from its 2019 levels by 2030. According to ClientEarth, Shell has since ignored this ruling and failed to take any substantive action.
The Paris Agreement, which was first signed on March 12, 2015 at the UN Climate Change Conference, is an agreement between 196 parties to develop concrete plans towards climate change action, with a primary goal of preventing the global average temperature from reaching +2 degrees Celsius from pre-industrialization levels, and to reduce greenhouse gas emissions 43% by 2030. In order to reach these goals, each of the 196 parties is required to make nationally determined contributions, or NDCs, which list out how they will specifically work towards these goals. Shell operates in 19 countries, of which 18 are parties to the Paris Agreement. Despite their presence in countries aligned with the Paris Agreement, however, Shell has been generally inconsistent in its climate action, preferring to engage in thought-based work with less concrete action. This thought-based work includes the Mountains, Oceans, and Sky scenarios, which each explore possible routes for climate action in relation to fossil fuels. This trend is one of the elements Shell is consistently being held accountable for in lawsuits filed against them, such as by the Dutch court who based their decision largely in their view that “Shell’s policies amount to “intangible, undefined, and non-binding plans for the long term.””
As I previously mentioned, one of the main goals Shell has set in terms of climate policy is to reach net zero emissions by 2050. According to ClientEarth, however, Shell isn’t working to cut Scope 3 emissions, despite this producing more than 90% of Shell’s emissions. This continued presence of Scope 3 emissions is suspect considering that “more than 70% of the world’s emissions come from fossil fuels”, which are largely used by gasoline companies such as Shell. Despite this call-out, Shell continues to engage in its thought-based work, most recently with its creation of the Sky scenario. On their website, Shell describes the Sky scenario as illustrating a “technically possible, but challenging pathway for society to achieve the goals of the Paris Agreement”.
In the Sky scenario, Shell argues that the global gasoline demand will peak in the 2030s, and that solar, bio, wind, and nuclear power sources will increase heavily by 2060. It also argues that global electricity generation will increase heavily by 2070, and that electric vehicles will replace half of the new cars being produced by 2030. In order to achieve these goals, Shell posits that there be a price on CO2 emissions. Interestingly, it makes little argument for decreasing fossil fuel usage, and deflects much of the pressure for change, claiming that Shell will be able to halve its CO2 emissions—which counts the CO2 emissions of its costumers, although it isn’t clear how this is defined—by 2050 “assuming society aligns itself with the Paris Agreement’s goals”.
Shell isn’t alone among gasoline companies in its inconsistency in regard to climate action and the Paris Agreement. While Shell and other companies have come under legal fire in the past for climate-related claims, this lawsuit holds particular promise. In gaining support from shareholders with over $12 million shares amongst themselves, ClientEarth’s case holds real potential to force Shell to adhere to the Paris Agreement and promises it has made in the past and take concrete steps towards reducing its emissions and negative contributions to climate change.
