Our Take: Climate Suits Put Euro Strategies in Focus - Energy Intelligence

Our Take: Climate Suits Put Euro Strategies in Focus | Energy Intelligence
3rdtimeluckystudio/Shutterstock Save for later Print Download Share LinkedIn Twitter Legal judgments due in Europe could massively add to the growing momentum behind oil company-targeted climate litigation, creating much more than an inconvenience for those in the crosshairs. A dozen or so pending cases seek verdicts that could require material changes to emissions targets — and by extension, corporate strategies — adding further uncertainty for boards and C-suites as investors look increasingly split on preferred strategic directions.Environmental campaigners have claimed two big victories in the past week. TotalEnergies was told to face a climate trial in France after being accused of not having a Paris-aligned transition strategy — an issue on which interpretations widely differ. The UK’s top court meanwhile ruled that Scope 3 (end-use) emissions should have been factored into an environmental impact assessment for an oil project in England.The lawsuit against Total, brought by a group of nongovernment organizations and local authorities, piles pressure on the French major as it looks to fend off a criminal climate change complaint and litigation around the controversial East African Crude Oil Pipeline. The plaintiffs received a further boost from a French Senate report last week calling for Total to accelerate investment in renewable energy to meet Paris Agreement goals and suggesting the French state should take a “golden share” in the company to influence strategy. If Total fails to convince the French judiciary, it could find itself in a similar situation to Shell, which was ordered by a Dutch court to slash global Scope 1, 2 and 3 emissions by 45% by 2030. Shell will find out in November if its appeal is successful, in a huge moment for both sides. With European courts apt to take their cue from previous rulings in the region, there could be copycat suits if either Shell or Total loses — and possibly in other jurisdictions.Even in its new UK home, Shell won’t find a haven from climate litigation. The UK Supreme Court decided Scope 3 emissions from UK Oil & Gas’ small-scale Horse Hill project in Surrey were “inevitable” and should have been included in the environmental impact assessment. Law firm Herbert Smith Freehills said this judgment could have a “significant impact on developers looking to bring forward similar projects,” and campaigners have been quick to call for its application on larger UK developments such as Rosebank. Operator Equinor wouldn't comment on the litigation but said Rosebank is progressing as planned. In Italy, Greenpeace and ReCommon have been bold enough to elevate their climate change case against Eni to that country's Supreme Court.Legal uncertainty may weigh on European oil firms’ share prices, but an unfavorable verdict would be much worse. US companies, which trade at higher multiples, face damage claims from climate lawsuits but nothing that would entail a material change in strategic direction. As European firms signal a need to delay their Scope 3 emissions cuts, a court-enforced strategy shift could be a boon to minority shareholders demanding similar changes, but an impetus for nearer-term value investors or those against the conglomerate transition model to flee.