Blog post

What does the Shell carbon emissions ruling actually mean?

Energy Blog, 28 May 2021

Earlier this week Shell was ordered by a Dutch court to reduce its net emissions by 45% by 2030.

It is a landmark ruling that has been hailed by climate change campaigners and will be appealed by the company. 

In particular, the judge said in her ruling that the energy group “must do more than monitoring developments in society and complying with the regulations in the countries where the Shell group operates”.

One can have a healthy dose of scepticism about oil companies investing in renewables, a business that is very different from what they are used to doing, but to me this raises a lot of questions.

Fundamentally, all of Shell’s business generates carbon emissions: their job is to get hydrocarbons out of the ground to use them as fuel for our cars, planes and power plants, or feedstock for the chemical industry. Most of it will end up in the atmosphere as carbon dioxide, exactly what we say we now want to stop doing. So to get Shell to reduce their carbon net emissions by 45%, it stands to logic that they will essentially need to reduce their net oil&gas production by 45%. But does that mean that the Dutch (using them as an example here because the court is Dutch, but this applies equally to all other Western countries, and beyond, given that carbon emissions have no nationality) will actually reduce their oil&gas consumption by 45% in that period? Or that they will instead just burn oil&gas provided by Saudi Aramco, Rosneft or PetroChina and refined outside of Rotterdam, instead of the Shell final products they were using? In that case, does it make a difference other than weakening an individual company?

Frankly, this smacks of hypocrisy or grandstanding, or both.

If we agree that the goal is to reduce carbon emissions then what we need to do is to reduce our consumption of oil&gas and coal, across the board – there’s no secret to it. As long as we use oil, and it is legal to do so, we need companies to provide that oil, and preferably companies that do so within the law. Targeting individual companies will not reduce consumption or supply, it will only reshuffle it towards other parties unconstrained by Dutch court decisions, as long as Dutch drivers continue to burn fuel and Dutch power plants burn gas.

Shell and other companies can be accused of many things, like funding climate change skepticism, lobbying to weaken anti-pollution and anti-emission regulations, promoting car use, distorting international diplomacy through an excessive focus on oil-rich regimes, but targeting them for being an oil company is absurd as long as we need the oil. We have been addicted to the convenience and apparent cheapness of oil, ignoring the multiple negative externalities it generates (like carbon emissions, air pollution, plastic pollution, and even more difficult-to-measure ones like sprawl, road deaths, and consuming a large chunk of our military budgets) and while it is easy to blame those who directly provide the oil (and profit from it, and encourage us to use more) we cannot absolve ourselves of all responsibility.

Shell is not the problem if we want to solve our emissions problems.

The lack of a carbon tax is a problem. The lack of consistent energy strategies that focus on tools that exist today and can be applied immediately is a problem. The lack of a genuine sense of emergency that would drive infrastructure investment decisions is a problem. Like it or not, our current economies have been built around ubiquitous car use and cheap coal-fired electricity, and we need to have an alternative before these can be taken away altogether. The good news is that the alternatives do exist and are increasingly cost-competitive (renewable electricity, electric cars, green hydrogen for industry), and even if their deployment has been rapid, it is not rapid enough – and something can and needs to be done about that.

Expecting an individual company to do more than what the law requires is something we can do as consumers (we can take our custom to suppliers that actually impose rules on themselves, in a transparent and real way, to reduce their externalities – or in the case of oil, by not using it) but it is not something public authorities should ask: the same laws apply to all.

Laws can be changed to impose a switch to alternative energy sources, and as it happens we are actually in the privileged position that today these alternatives are often cheaper, but our current infrastructure and the livelihoods of many of us are heavily skewed towards the status quo. So in order to make this change we both need to show the true price of oil (with the political impact of that, shown by the fierce protests fuel tax increases cause across the world) and force a change away from existing patterns of economic activity (again, with the impact on the people directly affected) – and a wider political deal is needed to protect the losers of the transition.

By all means let’s impose rules that make oil&gas consumption more expensive or more restricted, or rules on how oil&gas can be transported, stored, processed and burnt, and let’s apply these rules across the board. If you don’t like the grip Shell and other oil companies have on our governments and our policies, then target that: forbid all advertising by any company involved in oil&gas, make all contacts between oil&gas executives and government officials public. Forbid new investment in oil&gas burning infrastructure and provide a clear route for the industry to become smaller, highly regulated and focused on the things for which oil&gas are truly indispensable. They are by and large law-abiding bodies – if the rules are clear and cannot be gamed, they will follow them.

But targeting an individual company looks like a weak, guilt-absolving feel-good gesture and it is fundamentally useless and distracting from the real task ahead.