The oil industry has had a strange May!
Let’s start with the big, unprecedented losses. On Wednesday, a Dutch court ruled that Royal Dutch Shell needed to reduce its overall carbon emissions 45 percent from 2019 levels by 2030. That includes not only the company’s tabulated emissions, but also those of its suppliers and its products used and burned by customers. Brought by seven green groups and more than 17,000 Dutch citizens, the case against Shell alleged that the oil company violated the European Convention on Human Rights by knowingly obstructing the process for transitioning away from fossil fuels, and said it needed to adopt an alternative approach from its existing net-zero commitments. The lower court in The Hague agreed, writing that Shell’s existing policies for reducing greenhouse gases were too vague and that the company needed to make a detailed change of plans.
Even though the verdict only holds in the Netherlands, it’s historic for two reasons: It’s the first time Shell has been ordered to change its actual climate rules following an environmental suit, and it’s the first time that a company has ever been mandated to bring its operations in alignment with the Paris Agreement. Furthermore, it bolsters a ruling the Dutch Supreme Court issued in late 2019 finding that the Netherlands’ government needed to majorly reduce its emissions in order to stay in line with its human rights obligations. Both these court decisions are in line with a late-April ruling from Germany’s Constitutional Court that that country’s 2019 climate package was partly unconstitutional because it doesn’t do enough to install emissions-curbing measures until after 2030.
The same day as the Shell ruling, two U.S.-based oil companies were shaken by their shareholders. Two members of Engine No. 1, a small activist hedge fund that holds a minimal amount of ExxonMobil stock, won elections to board seats for the energy company. One more Engine investor could yet earn a seat, depending on how remaining vote-counting shakes out, which could then give the upstart fund dominance over one-quarter of Exxon’s board. The victories were seen as a setback for ExxonMobil CEO Darren Woods, who’d been attempting to quell investor disquiet over the company’s climate policies to seemingly little avail. As major investment funds like BlackRock and New York state’s pension backed Engine No. 1, “shareholders also approved measures calling on Exxon to provide more information on its climate and grassroots lobbying efforts” on Wednesday, according to Reuters. On top of that, Chevron’s investors voted 61 percent in favor of a proposal from Dutch activist investor Follow This to force the corporation to curb its emissions. Earlier this month, ConocoPhillips and Phillips 66 saw similar board votes to adopt carbon-cutting resolutions also brought forward by Follow This.
These developments are hugely significant for anti–fossil fuel advocates. They represent some of the first moments shareholders and international judges have firmly pressed energy companies’ feet to the (possibly literal) fire to get them to demonstrably, quantitatively, and quickly reduce their mind-boggling carbon footprints. Plus, they will open up avenues for other international class-action climate lawsuits and give grist to the burgeoning green investment movement. This could mark a turn from companies offering broad, vague pronouncements about climate change to establishing concrete timelines, goals, and numbers.
But that depends on whether this trend actually catches on—or flames out.
After all, it’s not as though May has been entirely good news on the climate front. On Thursday, an Australian judge ruled that the country’s environment minister has a “duty of care” to consider the harmful effects to children from increased carbon emissions when approving new energy projects. Nevertheless, it allowed the minister to make the final decision on expanding a coal project. On May 14, Spain’s parliament passed a law forbidding all new fossil fuel permits, banning sales of fossil-fueled vehicles by 2040, mandating an end to all ongoing fossil fuel production by 2042, and greening 74 percent of the country’s electricity by 2040. But it only commits to an emissions reduction of 23 percent from 1990 levels by 2030—which is much less meaningful than a 23 percent reduction from 2020 levels would be, and is a lower rate than those recently promised by other European countries.
The U.S. government, in the meantime, is failing to hold its end of the bargain. On May 17, the Supreme Court turned away a 2018 lawsuit filed by the city of Baltimore against dirty energy companies for harming it by marketing fossil fuels and obscuring their damages. (Justice Samuel Alito holds stock in some of the corporations involved in the suit and therefore recused himself; Justice Amy Coney Barrett has longtime family ties to the oil industry but did not recuse herself in this case.) Now the case goes back to the U.S. Court of Appeals for the 4th Circuit. The justices didn’t determine whether energy companies have a duty to compensate cities for climate damages, but instead focused on the route of litigation: in state courts vs. federal courts. The companies in the suit—including ExxonMobil, Shell, and BP—prefer federal courts, because their rulings tend to be more favorable to the industry; the city of Baltimore prefers state courts, as local court rulings tend to be more favorable to smaller litigators.
Then, on May 21, the U.S. District Court for the District of Columbia ruled that the long-battled Dakota Access Pipeline could continue operating while undergoing environmental review from the Army Corps of Engineers. The point of the opinion, however, was that the federal government, through the corps, could have ordered the pipeline to shutter months ago if it had wanted to so, but it instead let the decision fall to federal judges who felt they legally lacked the authority to determine the pipeline’s actual harms. Meanwhile, the Biden administration on Wednesday filed a brief in the U.S. District Court in Alaska that defended a Trump administration initiative allowing ConocoPhillips to drill for oil and gas in the state, as part of a project that would produce more than 100,000 barrels of oil a day for the next three decades. Yet the U.S. government still has not given its word on the Trump-approved, much-protested Line 3 pipeline in Minnesota (whose state government rejected additional investigation) or on the fight over Michigan’s Line 5 pipeline, whose builder, Canadian firm Enbridge, has flouted Gov. Gretchen Whitmer’s November order to shut down the line.
All of this demonstrates a marked contrast both with President Joe Biden’s clean energy pledges and with the measures other nations have adopted to halt new fossil programs altogether.
Wednesday’s victories over fossil fuel companies should be celebrated by global warming activists, but whether this is actually a new direction for the oil and gas industry has yet to be determined. The United States, the world’s second-largest polluter, is still delaying firm national action, letting courts bounce cases around and leaving it to still-novel green investment organizations to hold corporations accountable. That could bode ill even for countries that have taken more decisive action, all of which are much smaller and don’t emit anywhere near as many greenhouse gases as the U.S. does.