Regulatory responsibility and the duty of care in realising the energy transition

FSR Debates series

 

Based on an unwritten duty of care in Dutch tort law, a Dutch Court  has in May 2021  recognized that the oil and gas company Shell has an “obligation of result” to reduce CO₂ emissions resulting from the Shell group’s activities, and a “best-efforts obligation” to reduce emissions generated by its business relations, including suppliers and end-users.  While Shell was not yet found to be in violation of its reduction obligation, the Court held there was danger of “imminent breach” because it considered Shell’s climate policies insufficient. The court clarified that Shell’s responsibility exists independently of states’ abilities and/or willingness to fulfil their own human rights obligations.  Therefore, state action – or here the lack thereof did  not detract from Shell’s standalone obligations. Relying on IPCC reports and the Paris Agreement, the Dutch court observed a “widely endorsed consensus” that emissions must be reduced by net 45% by 2030 and to net zero by 2050, and this consensus applies globally and also to non-state actors.  Therefore, Shell – while not solely responsible – may be expected to do its part to achieve these so-called “reduction pathways”.

In the wake of recent rulings across Europe and globally, requiring governments to lower emissions, this latest decision marks the first time any court in the world has imposed a duty on an energy company to do its share to prevent dangerous climate change. The Dutch Court’s decision against Shell effectively extends to a private entity the principles established by the same court in 2015 in Urgenda – the first ever ruling ordering a government to set more ambitious climate target. Urgenda reverberated in significant climate rulings around the world, including Ireland, France, Germany and Belgium. On the same day as the decision against Shell, the Australian Federal Court recognized a governmental obligation to ensure children are not harmed by future coal projects. This decision was the first in the world to impose a direct duty of care on a government official to protect young people from the future impact of climate change.

The Shell decision’s wider implications within the broader momentum for climate change litigation and increasing judicial scrutiny over corporate behavior have already attracted commentary. But what are the implications for this type of ‘duty of care’ or ‘do no harm’ approach by the courts for energy regulators – should they too share a duty to prevent dangerous climate change? Do regulators too have standalone obligations – irrespective of what national governmental authorities do or do not do? How can energy regulators balance potentially competing concerns – for example to ensure climate change targets are reached while at the same time guaranteeing security of supply?

 

Draft Programme

Introduction to the Debate and Opening Presentations

14.00 – 14.05   Introduction to the Debate

14.05 – 14.15  The Dutch ruling in the Shell case and its potential implications for regulatory authorities | Leigh   Hancher, Florence School of Regulation

14.15 – 14.25   The Norwegian Supreme Court ruling on Norwegian oil and gas drilling and the ECHR follow up: Prof dr Henrik Bjornebye, University of Oslo and BAHR

Panel Discussion: Introductory Remarks, Polls and Comments

Moderator: Alberto Pototschnig | Florence School of Regulation

14.25 – 14.50   Introductory remarks from the panellists

Zsuzsanna Pató, RAP;

Jorge Vasconcelos, FSR;

Wil Webster, OGUK.

14.50 – 14.55   Polls

14.55 – 15.15   Comments on the outcome of the polls and Q&A from the audience

Panellists

15.20 – 15.30   Concluding remarks

Leigh Hancher | Florence School of Regulation and Tilburg University
Alberto Pototschnig | Florence School of Regulation