The Rise In Forward-Looking Corporate Climate Cases: From Shell To Santos
Article originally published by Center for International Environmental Law (CIEL)
Climate litigation has taken on even greater importance after the failure of COP26 to deliver the action and resources required to accelerate the energy transition and remedy mounting climate harms. As progress in international negotiating rooms stalls, litigation in national and regional courtrooms plays an ever more critical role in efforts to compel urgently needed climate action. Those cases focus on holding governments and, increasingly, corporations accountable for their climate inaction and ongoing contributions to global warming, which gravely threaten human rights.
Companies in high-emitting sectors are facing mounting public scrutiny and potential legal liability over the incompatibility of their operations with a safe climate future. From expanding oil and gas production to greenwashing carbon-intensive products, the conduct of the fossil fuel industry and other polluting sectors is subject to a rising number of legal challenges. More and more, the focus of those challenges is shifting from companies’ historical contribution to climate change and past misrepresentations of climate science to their current role in prolonging the fossil fuel era and their present claims about the climate impacts of their products.
Using Courts to Compel Corporate Climate Action
Lawsuits have already begun to hold corporations accountable for failing to rapidly bring their emissions in line with a 1.5°C pathway. The most prominent recent example is the groundbreaking ruling in the Netherlands, Milieudefensie et al v Royal Dutch Shell. The Hague District Court’s May 2021 decision marked the first time a company has been held legally accountable for its contribution to climate change. The court ordered Shell to reduce its emissions out of a duty to respect human rights and conform to the temperature goals set in the Paris Agreement. The ruling also set a precedent in holding Shell responsible for emissions across its supply chain, including those from its own operations and emissions from the use of its products (often referred to as Scope 1, 2, and 3 emissions), the latter of which constitute the lion’s share of its carbon footprint. Shell must reduce its overall global emissions 45% below 2019 levels by 2030. That near-term target reflects the outsized importance of reductions achieved this decade compared to those promised by mid-century to avoid climate catastrophe. Practically speaking, the 2030 deadline also means that Shell cannot rely on engineered carbon dioxide removal techniques or purported negative emissions technologies that are not currently — and may never be — viable or safe at scale.
A similar lawsuit is currently pending in France against the oil major Total (now renamed TotalEnergies). Environmental NGOs and local municipalities are seeking to hold the French fossil fuel giant accountable for failing to adequately report climate risks from its business operations and products and align its activities with the goals of the Paris Agreement.
New corporate climate accountability litigation has also arisen in Germany. Following Milieudefensie v. Shell and a successful constitutional climate case against the German government, environmental groups in Germany have commenced legal proceedings against German automakers (BMW, Mercedes-Benz, and Volkswagen) for failing to align their business operations with the Paris climate goals and uphold the rights of future generations. Through their parallel lawsuits, Deutsche Umwelthilfe (DUH) and Greenpeace Germany aim to compel the automakers to end the sale of fossil fuel-powered cars by 2030. Additionally, Greenpeace is demanding that Volkswagen reduce its emissions by 65% by 2030. These cases signal that the growing trend toward challenging corporate climate impacts extends beyond the fossil fuel industry.
The Mounting Case for a Fossil-Free Future
The case for such challenges is gaining strength, as the scientific and political consensus converges around the need to limit warming to 1.5°C. Throughout 2021, reports and statements issued by scientific, economic, and human rights authorities underscore that plans to continue producing the fossil fuels heating the planet are at odds with the Paris Agreement objectives and human rights obligations.
In 2018, the Intergovernmental Panel on Climate Change (IPCC) warned that exceeding warming of 1.5ºC will result in dramatically greater climate damage and even more significant threats to human health, human rights, human lives, and biodiversity. The August 2021 Intergovernmental Panel on Climate Change (IPCC) report examines the physical science basis for climate change and sounds the alarm, finding that this temperature threshold will likely be reached in the early 2030s, underscoring the need for urgent emissions reductions this decade.
For fossil fuels, which are responsible for more than two-thirds of global greenhouse gas emissions, the implications of these analyses are clear. In an official statement, the UN Secretary-General António Guterres called the IPCC’s latest report a “code red for humanity” that must “sound a death knell for coal and fossil fuels, before they destroy our planet.” Even the notoriously industry-friendly International Energy Agency recognized that new investments in oil, gas, and coal projects must end immediately to keep warming to no more than 1.5ºC.
Yet, government-backed plans for fossil fuel production through 2030 amount to more than double the level that would be consistent with limiting warming to 1.5ºC – a discrepancy that researchers call the “production gap.” We cannot avoid catastrophic climate change without closing this gap. And the gap will remain until fossil fuels go.
Countries are beginning to recognize the need to end fossil fuel production and manage the industry’s decline. Led by Denmark and Costa Rica, a coalition of countries and one subnational government launched the Beyond Oil and Gas Alliance at COP26, pledging to end new oil and gas exploration and phase out production. Momentum is also building behind the call for a Fossil Fuel Non-Proliferation Treaty, a global agreement to halt fossil fuel expansion and wind down existing production. And mounting public protests against new oil developments are having an effect: Less than a month after climate campaigners at COP26 denounced plans in the UK to develop the Cambo offshore oilfield in the North Sea, Shell withdrew from the project.
Absent more such decisions, sustained production cuts, and plans to drastically rein in emissions, oil and gas companies— and the governments that authorize and sanction their plans — are knowingly jeopardizing human rights on an unprecedented scale. As the UN High Commissioner for Human Rights Michelle Bachelet stated in remarks ahead of COP26, climate action “is a human rights obligation and a matter of survival.”
Continued Climate Deception: The Myth of Climate-Safe Oil and Gas
The problem is, fossil fuel companies are not simply advancing business-as-usual production plans that cannot be squared with a safe climate. They are cloaking those plans in “net-zero” pledges and purported “lower carbon” pathways that mask fossil fuels’ climate impacts and prolong their hold on economies. Climate deception is not just a thing of the past. Oil and gas companies continue to mislead the public by suggesting they can keep producing fossil fuels and avoid climate catastrophe.
No longer able to deny that their products drive climate change, oil and gas companies have pivoted to portraying their production of fossil fuels as consistent with action to avoid climate catastrophe. Through vague vows to reach net-zero emissions and slick statements touting technologies like carbon capture, petroleum producers are distracting from the damage they are unleashing by continuing to sell their products. Their greenwashing gambit both deflects from their business-as-usual operations and misrepresents the impacts of purported “lower carbon” technologies.
The fossil fuel industry frequently portrays carbon capture and storage (CCS) and hydrogen as climate solutions without disclosing the extent to which they perpetuate fossil fuel production and use and introduce new environmental, health, and economic risks. So-called “blue hydrogen,” hydrogen made from methane with CCS, is an emerging market for fossil gas. New research shows that blue hydrogen, far from being “clean,” potentially emits more than burning coal or other fossil fuel sources directly. And carbon capture technologies are not only uneconomic and ineffective, but they are also dangerous and deepen dependence on oil and gas. CCS requires the construction of new hazardous pipelines, disproportionately sited in marginalized communities already overburdened by pollution and systemic environmental racism. What’s more, the vast majority (over 80%) of CCS deployed to date has been for enhanced oil recovery — injecting CO2 into depleted oil wells to pump still more oil out of the ground. These facts about CCS and hydrogen are conspicuously absent from fossil fuel companies’ advertisements, which instead portray CCS as “essential to controlling climate change.”
Oil and gas companies are increasingly being called out on this greenwashing, however, by intergovernmental bodies and civil society. The UN Secretary-General announced the creation of an expert group to scrutinize corporate net-zero commitments. And a mounting number of legal challenges are pushing back against misleading advertising and probing for the proof behind the promises.
Suing Santos: Proof not Promises
On August 25, 2021, the Environmental Defenders Office (EDO) filed Australia’s first oil and gas industry greenwashing case, targeting Australian company Santos. The complaint, filed in Australian Federal Court on behalf of shareholder advocacy group Australasian Centre for Corporate Responsibility, challenges Santos’ claims that fossil gas is clean and that the company has a credible plan to reach net-zero emissions by 2040. Carbon capture and storage and blue hydrogen are integral to Santos’ net-zero plans, and EDO says Santos has failed to disclose the true emissions impact of these technologies. If the complaint moves forward, it will be the first time a court anywhere in the world is called upon to assess the lawfulness of a company’s pledges to reach net-zero emissions using CCS and blue hydrogen. As EDO explains, this is “a landmark, world-first test case in relation to the viability of carbon capture and storage, and the environmental impacts of blue hydrogen, increasingly touted as a key element in gas companies’ pathways toward net zero emissions.”
Protecting Consumers Against Climate Deception
In the U.S., over half of the more than two dozen cases currently pending in state and federal courts against fossil fuel companies and their industry associations under tort, consumer protection, and investor protection laws reference the companies’ ongoing deceptive practices. Several of these cases specifically describe misleading representations around hydrogen and CCS, indicating that how fossil fuel companies promote their purported climate “solutions” could have legal ramifications.
Lawsuits brought by the District of Columbia, Vermont, and New York City, for example, cite Shell’s portrayal of hydrogen as a form of greenwashing. In the DC case, the complaint calls out Shell for advertising hydrogen as “clean” while omitting that nearly all hydrogen produced in the U.S. comes from fossil gas. The case State of Vermont v. ExxonMobil et al. filed in September 2021 also notes that Shell both overstates its investments in hydrogen and ignores the adverse environmental impacts of this alternative fuel. Shell’s omission of the link between fossil gas and hydrogen is also cited in a case filed by New York City on Earth Day 2021 against ExxonMobil, Shell, BP, and the oil and gas lobby group, the American Petroleum Institute, alleging violations of the City’s Consumer Protection Law.
That lawsuit, City of New York v. ExxonMobil et al., asserts that fossil fuel defendants have engaged in misleading marketing of their products, including through deceptive portrayals of how technologies affect the impacts of their emissions. For example, the complaint cites ExxonMobil’s ads that present the company as a climate leader because of its work on CCS but fail to mention that Exxon’s operations and products are a leading contributor to the climate crisis – let alone that CCS has repeatedly failed to deliver promised reductions. As the complaint points out: “ExxonMobil captures only about 2 percent of its annual emissions, and [ ] the company’s investments in carbon capture and sequestration are a drop in the bucket when compared to its current and planned spending on fossil fuel exploration, extraction, and development.”
Another case, Beyond Pesticides v. ExxonMobil, brought under the DC Consumer Protection Act, likewise alleges that Exxon has engaged in greenwashing, including through deceptive ads that obscure the problems with CCS while making it appear that carbon capture is a major part of Exxon’s business and a key solution to the climate crisis. The complaint points to Exxon’s advertisements comparing its carbon capture technology to carbon dioxide uptake by trees and other plants and to Exxon’s statements that it is a leader in CCS. These representations, the complaint argues, do not disclose that Exxon remains focused on expanding its oil and gas business and that the company’s investments in carbon capture — a costly and unproven technology — are small in comparison: “CCS technology has yet to be proven to be technologically or financially viable at a scale sufficient to offset the effects of ExxonMobil’s production and the use of its petroleum products.”
Conclusion
Big Oil is going to great lengths to show that it is “going green.” But history provides every reason to doubt those claims and no reason to credit them. In reality, fossil fuel companies’ core business models remain largely unchanged — and as incompatible as ever with climate goals. The industry is using the façade of false climate solutions to deflect and distract from the hard reality that there is no place for fossil fuels in a safe climate future.
Business-as-usual oil and gas production by any other name remains climate destruction. And now, in addition to planetary risk, it carries significant legal risk. Advertising campaigns touting fossil gas as “clean” energy, promoting CCS and blue hydrogen as “low-carbon” solutions to the climate crisis, and pledging to achieve “net zero” emissions while continuing to produce oil and gas aren’t just disingenuous. If determined to be misleading representations of commercial activity, they may be illegal under consumer protection statutes and other applicable laws. Furthermore, continued fossil fuel production in the context of the mounting climate emergency may be enough to trigger liability, given the clear evidence that such production is inconsistent with preventing climate catastrophe and protecting human rights.
A growing number of lawsuits demand that companies align their operations with the emissions reductions that science shows are necessary to avoid further harm to people and the planet. Courts are being called upon not only to hold companies accountable for their contributions to the present climate crisis and its devastating impacts but increasingly to compel them to act now to prevent ongoing and future harm. This kind of forward-looking corporate accountability is indispensable to climate justice.
