Shell Ordered To Reduce Carbon Emissions In First-Of-Its-Kind Ruling

A Dutch court ruled on Wednesday that Royal Dutch Shell (NYSE: RDS-A) is partially responsible for climate change. The district court in The Hague ordered Shell to reduce its carbon emissions by 45% by 2030 as compared to 2019 levels.

The ruling is in accordance with the United Nations Paris Agreement that seeks to prevent temperatures from rising more than 1.5 degrees Celsius above preindustrial levels.

The court said that Shell is not in breach of its obligations to reduce carbon emissions, but rather there is an “imminent breach,” which influenced the implementation of the reduction ruling.

Why It Matters: The ruling could have far-reaching implications for the oil industry. Lawyers and consultants claimed that Wednesday’s ruling has the potential to set precedent in other jurisdictions and, therefore, expose the oil industry to new legal regulations over carbon emissions. The same could apply to companies in other heavily polluting industries.

What's Next: Shell’s ruling is a first-of-its-kind and adds increasing pressure to oil and gas companies.

Shell said it is disappointed with the ruling and plans to appeal.

RDS.A Price Action: RDS.A shares gained 0.38% Wednesday, closing at $39.13.