Shell vows to accelerate energy transition following Dutch court ruling

Royal Dutch Shell has revealed it will commit to a 45% carbon emissions reduction by 2050 following a court ruling by a Dutch court on behalf of the environmental activist group Friends of the Earth.

Shell's CEO Ben van Beurden said his company will "rise to the challenge" with its energy transition after the court ruled the company's initial plans - which were backed by the majority of shareholders - were not ambitious enough.

Read more: Shell must cut emissions by 45% by 2030, Netherlands court rules

The energy giant had previously set itself a goal of reducing carbon emissions by 20% of 2019 levels by 2030 with the goal of becoming completely net-neutral by 2050.

89% of shareholders backed the CEO's plans, but at least one-third supported a call for greater cuts sent in by French NGO Follow This.

Shell's plans were to slowly phase out oil and coal while growing its renewable energy wing over the course of a few decades. It would judge its progress by a metric called "energy intensity" which was invented for the purpose of judging its own climate goals.

However, the recent court ruling threw a spanner in the works. While the court's verdict only applies inside the Netherlands, its ramifications will affect Shell's business in all major markets.

A joint report from the Orsted and the World Resources Institute (WRI) on June 4 declared that global governments and the private sector "must work together" in order to successfully battle climate change. 

Read more: Governments and businesses "must work" together to meet climate goals

Similarly, the National Oceanic and Atmospheric Administration (NOAA) reported on Tuesday that atmospheric carbon levels have reached record highs since it began taking measurements in 1958, despite the effect the pandemic had on consumption habits.

The EU recently enshrined its net-zero targets and raised the carbon price in bids to help the bloc meet its climate targets.

The US also recently approved its first major wind farm, the 800MW "Vineyard project" as part of its pledge to tackle climate change.

In a LinkedIn article published on Wednesday, van Beurden said he feels the ruling "does nothing to reduce global carbon emissions" and expressed surprise that "Shell was being singled out by a ruling."

The ruling comes into effect immediately and should not be suspended pending an appeal, so the CEO revealed his plans to accelerate his company's energy transition.

"The court ruling has not changed the fact that Shell is more determined than ever to play its part and lead in this global challenge," he said.

He added: "We have a clear target to become a net-zero emissions business by 2050, in step with society’s progress towards achieving the goal of the Paris Agreement. We have set rigorous, short-term reduction targets along the way to make sure we achieve net-zero."

The Dutch ruling mandated Shell increase its emissions targets from its original plans, but the judge intentionally left it open to allow Shell to forge its own path for its energy transition.

Shell's oil production peaked in 2019, with plans to begin reducing output in favour of gaining a foothold in renewable energy, van Beurden claimed.

The company recently partnered with Worley to deliver a green hydrogen hub in the Netherlands powered via electrolysis gathered at an offshore wind farm.

It is set to become one of the largest wind farms in the world and is scheduled to commence operations in 2023.

Read more: Shell faces shareholder pressure to further climate action

For the time being, however, the company will continue to operate new oil and gas ventures "for the sake of maintaining a strong company" as van Beurden puts it.

"We need this financial strength to keep attracting investment in Shell,"  he said. "So we can deliver the energy the world needs, invest in lower-carbon energy and support livelihoods in communities where we operate, as well as those of our customers, employees and contractors."

"We need this financial strength to keep attracting investment in Shell. So we can deliver the energy the world needs, invest in lower-carbon energy and support livelihoods in communities where we operate, as well as those of our customers, employees and contractor," he added.

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