Now that the court in The Hague, in a case brought by Milieudefensie (Friends of the Earth Netherlands) and others, has ruled that Shell has to just about halve its CO2 emissions, the oil company will have to pull out all the stops and put all its efforts on sustainable alternatives such as wind and solar energy. At least, that is what you would think.
Wrong, says economist and energy expert Aad Correljé of the Faculty of Technology, Policy and Management. Shell must now reduce its own CO2 emissions and has a responsibility that extends to suppliers and customers. In this regard it has a ‘best efforts obligation’ which means that Shell must use its influence to minimise the emissions of its suppliers and customers. Shell has complete freedom in how it meets these goals. “The upshot is that Shell does not have to reduce its oil and gas production at all,” says Correljé. “It can simply continue as before, but do it more sustainably. All sorts of processes that use a lot of fossil fuels – be it drilling, pumping or shipping of oil and gas – could be done using electric power.”
‘Activist shareholders will feel more supported by other shareholders’
That Shell may ship oil on electric power does not exactly sound radical. Will it have any effect at all?
“It probably will. The extraction, processing and transportation of fossil fuels is extremely energy intensive. About 15% of the total emissions associated with fossil fuels escapes into the atmosphere during these processes. If you can reduce this by 45%, it will have an impact. Making these processes more sustainable also needs lots of innovation, and that innovation can also be used to make the petrochemical industry more sustainable. Just think about all the manufacturing of plastics, artificial fertilisers and raw materials for medicines. This branch of industry is still highly energy intensive.”
But won’t Shell have to use more hydrogen technology and wind and solar energy?
“This was naturally discussed and acted on in the board room, though not as much as some would like. Investments in alternative energy sources will have to be ratcheted up. The climate verdict will make the more activist shareholders feel stronger and more greatly supported by other shareholders. Shell was already working on this, but the court decision will give it a push.”
Shell’s stocks did not suffer on the market after the court decision. What conclusions can you draw from this?
“That investors assume that Shell is not the only one that needs to be more sustainable. A lot of other oil companies will probably also face this situation. If shareholders believe that Shell will be able to undergo change relatively well, efforts to make the oil sector more sustainable may just be advantageous for the company.”
‘Incredible. A real win for Dutch law’
Student Wouter Maas (23) is the TU Delft Green Team Coordinator. Green Teams work in all the faculties on greater sustainability by raising awareness, education and research. Maas is responsible for the education portfolio in GreenTU, the central sustainability body at TU Delft. He is in the list (in Dutch) of 100 young sustainable leaders in the Netherlands.
What did you think of the court decision?
“It was incredibe. A real win for Dutch law. Just as in the previous Urgenda case, (in which the environmental organisation Urgenda brought the Dutch Government to court for failing to meet its emissions target, eds.) the verdict shows that you can make companies subject to obligations that are in line with science. It’s a good model.”
What do you expect will happen now?
“I hope Shell will now take more action and speed up its sustainability through research, technological innovations and investments. Shell responded by asking if everyone will be prosecuted at a certain point. I think they will be. That’s exactly the point. Every large company will have to examine its role in the climate transition. It forces companies to take their responsibility. I am happy about that.”
Shell has to comply with the obligation to show results of its own CO2 reduction and must use its influence to minimise the emissions of its suppliers and customers. What do you expect will happen?
“It shows systems thinking instead of the individual thinking that we still had a couple of years ago. I think the idea of bearing responsibility for the product that you supply is right.”
Should Shell advise people to halve the amount they drive?
“They should offer the option that you really can reduce CO2 emissions. Sustainable options should be made more attractive, and companies should offer more sustainable options. They should therefore see how they can make their products more sustainable. This could be electric or hydrogen cars for example, which they could scale up more quickly.”
Shell and TU Delft have been ‘preferred partners’ since 2011. Do you expect this to have an impact on TU Delft?
“I don’t think much will change as TU Delft is already doing a lot on sustainability. Shell still invests most of the research money in fossil fuel extraction. It would make sense that they shift their research investments towards solar and wind energy and in storage technology. This is a good opportunity for TU Delft. I’m very interested in seeing how this will develop.”
Jos Wassink/ Tomas van Dijk
Delta also asked Rector Magnificus Tim van der Hagen for a response about the cooperation between TU Delft and Shell. After all, TU Delft researchers are still doing research with Shell into maximising revenues from oil fields. Will the climate verdict bring an accelerated end to this kind of cooperation?
A spokesperson let it be known on behalf of Van der Hagen that ‘some projects in the field of fossil fuels are still running', but that 'new research projects with industrial partners are always about accelerating the energy transition'. According to the spokesperson, for the past four or five years ‘almost all new major research projects with Shell have focused on sustainable energy supply'. She cites solar panels, wind energy and biofuels as examples. ‘TU Delft’s expertise is now almost entirely focused on new energy, making us an interesting party for this industry to work with.’