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Shell (RDS.A) to Appeal Against Court's Climate Target Decision

Royal Dutch Shell plc (RDS.A) announced that it will appeal against the decision of the Dutch court, which ordered the company to slash carbon emissions from its oil and gas operations by 45% by 2030 compared with the 2019 levels.

In May 2021, a Dutch court in The Hague reached the verdict after environmental groups argued that Shell’s renewable energy targets are insufficient to avoid the consequences of CO2 emissions. The decision was made after Milieudefensie, the Dutch arm of Friends of the Earth, sued the company for violating human rights.

In April 2021, Shell brought forward its powering progress strategy to accelerate the transition of its business to net-zero emissions, in line with the society’s progress toward the goal of the Paris Agreement on climate change. However, the court did not consider the company’s emission-reduction strategy, as the hearings, which resulted in the decision, occurred several months earlier.

Shell cited that it will accelerate its energy-transition plans as a result of the order but is considering revoking it to follow its climate timetable. Hence, the company decided to appeal as it believes that a court judgment against a single company is not effective.

As part of its strategy, Shell established its short- and medium-term goals for reducing its carbon footprint. The company set out plans to reduce both Scopes 1 and 2 emissions from its operations through a combination of energy-efficiency improvements, the elimination of routine flaring, and carbon capture and storage technology. It is working with suppliers to use renewable power in facilities and concentrating its global refining portfolio from 13 company-controlled sites in 2019 to five Energy and Chemicals parks by 2030.

Shell also set out plans to reduce Scope 3 emissions, which are produced when customers use energy products that the company sells. Scope 3 emissions account for more than 90% of the company’s emissions. Hence, Shell is working with customers, governments and the wider community to determine rapid and realistic methods to reach net-zero emissions.

Company Profile

Shell is one of the primary oil majors — a group of U.S. and Europe-based big energy multinationals — with global operations. The company is fully integrated, as it participates in every aspect related to energy from oil production to refining and marketing.

Zacks Rank & Stock to Consider

The company currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Patterson-UTI Energy, Inc. PTEN, SM Energy Company SM and NexTier Oilfield Solutions Inc. NEX, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Patterson-UTI’s earnings for 2021 are expected to rise 36.2% year over year.

SM Energy’s earnings for 2021 are expected to surge 917.9% year over year.

NexTier’s earnings for 2021 are expected to increase 93% year over year.

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