Dutch court hands Shell chairman shakeup stick

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LONDON, May 26 (Reuters Breakingviews) - Besides environmentalists and uppity investors, Big Oil now has to worry about judges. A Hague court order for Royal Dutch Shell (RDSa.L) to toughen emissions reduction targets opens a major new front against the hydrocarbon sector. With public, investor and now legal sentiment shifting, it’s the perfect moment for new Chairman Andrew Mackenzie to effect a change of course.

Wednesday’s ruling is a huge victory for the seven environmental groups that filed their case two years ago. The crux of their argument is that Shell’s continued investment of billions of dollars in hydrocarbons each year violates the human rights of the 17,000 Dutch citizens who backed the suit. Shell does have plans to reduce its carbon dioxide emissions to net zero by 2050, in line with wider United Nations-approved global climate goals. But in essence the judge said they were imprecise and not credible.

There’s no doubt that the court-endorsed target – cutting carbon dioxide emissions by 45% from 2019 levels by 2030 – is tough for Shell. But it is not impossible. Last week, the International Energy Agency, hardly a Greenpeace proxy, advocated for reductions of that magnitude to keep global temperature increases below 1.5 degrees Celsius compared to pre-industrial levels. BP (BP.L) already has aggressive plans to cut oil production by 40% by 2030, while ramping up green energy investment to hit 25 gigawatts of capacity – roughly two-thirds of Britain’s peak power use – by 2025. France’s Total (TOTF.PA) aims for 35 gigawatts by the same date.

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Shell’s investors have already been cooling towards Chief Executive Ben van Beurden’s climate approach, which has no targets for new renewable energy capacity. At last week’s annual general meeting, nearly a third voted in favour of an activist motion to set “inspirational” emissions aims, double the level of support in 2019. That, and the Dutch court order, create fertile ground for Mackenzie, who took over as chair exactly a week ago.

As CEO of BHP (BHP.AX), (BHPB.L), Mackenzie made the $168 billion miner the first to pledge to tackle carbon dioxide from use of its products, the so-called Scope 3 emissions that are the energy majors’ sharpest headache. Effecting change at $150 billion Shell is a more daunting task, requiring drastic cuts to carbon investments. But with the consensus shifting on so many fronts, Mackenzie has plenty of ammunition to push for tough action.

Follow @edwardcropley on Twitter

CONTEXT NEWS

- A Dutch court on May 26 ordered Royal Dutch Shell to reduce its greenhouse gas emissions by 45% by 2030 relative to 2019 levels, a much tougher target than the oil giant’s current goals.

- Before the ruling by the Hague court, Shell’s aims were to reduce the carbon intensity of its products by at least 6% by 2023, by 20% by 2030, by 45% by 2035 and by 100% by 2050 compared with 2016.

- The lawsuit brought by seven environmental groups including Greenpeace and Friends of the Earth Netherlands is the first time that climate campaigners have turned to the courts to try to force an energy major to change its climate strategy.

- The suit was filed in April 2019 on behalf of more than 17,000 Dutch citizens who say Shell’s continued investment in fossil fuels is threatening their human rights.

- Shell’s London-listed shares were little-changed after the ruling, trading at 13.72 pounds at 1341 GMT on May 26, down 0.1%.

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