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Will the court’s Shell ruling have an impact on climate change?

2 november 2022

In 2021, the Dutch civil court issued a landmark ruling holding Royal Dutch Shell responsible for CO2 emissions of consumers and businesses. The court ordered that Shell must realise a 45% reduction (compared to 2019 levels) in CO2 by 2030. A year later, the A4CL (Amsterdam Centre for Climate Change and the Law) conference asks the question: will the Shell verdict actually make a difference?
Van der Ploeg (L) and Van Wijnbergen

A number of climate, law and economics experts were invited to speak at the conference held in Amsterdam on 27 October.

Thought experiment

UvA EB professors Sweder van Wijnbergen (Professor of International Economics) and Rick van der Ploeg (University Professor of Environmental Economics) were 2 of the speakers at this event. Their presentation consisted of a ‘thought experiment’. The experiment explored the hypothetical impact of what would happen if the top 30 companies in Dutch industry were ordered to reduce CO2 emissions by 45% by 2030.

The resulting discussion led to some important conclusions and recommendations for climate policy in the future.

Van de Ploeg: ‘The key point to remember is that this important ruling shows the complete failure of government climate policy formulation. There are a few possible reasons for this: adverse consequences for income distribution, displacement of high-emission industries to outside the EU, green paradoxes, and strong fossil lobbies. Looking at the specific target of 45%, there are a few possibilities for improvement. First, economists would recommend 45% emission reductions for the aggregate and then permit trading so that the biggest cuts are achieved by those companies that that have the biggest pollution per unit of output. Next, we need to understand that such a target will only have a sizeable effect on emissions and temperature if all the big emitters bring down their emissions accordingly. There’s always a risk that the cuts in emissions by Shell will just be taken up by other oil and gas companies producing more.’

It would be very helpful to have an additional court ruling that prohibits any new exploration investments, preferably for the whole industry.

Moratorium

One of the economics professor’s most important recommendations focuses on prohibiting any new exploration investments to discover new oil and gas reserves. ‘This is totally incompatible with the 1.5 degrees target in the Paris agreement. It would be very helpful to have an additional court ruling that prohibits any new exploration investments, preferably for the whole industry. This could then be complemented with a ruling that places a permanent, strict moratorium on coal-fired power generation. All in all, the rulings might not be as effective as many had hoped. But they will hopefully act as a catalyst for government to step up quickly and take effective climate action before it is too late,’ says Van de Ploeg.

More details about the speakers and the A4CL conference can be found on the conference webpage.