Climate Change, Emissions Liability, and Multinational Corporations: Notes from Friends of the Earth v. Royal Dutch Shell

The recent decision of the Hague District Court in Friends of the Earth v Royal Dutch Shell marks the first instance where a duty was cast on a corporation to reduce its carbon emissions. Consequently, this decision is significant in the efforts to create a regime of corporate emissions liability. Little attention, however, has been spent on how this decision treats legal entities. In holding Royal Dutch Shell responsible for Shell subsidiaries’ carbon emissions, and the manner in which this responsibility was imposed, the Court radically reconceptualised limited liability. A new enterprise liability regime was inaugurated, with a central focus on the legal entity which exercises decisive influence in creating climate change mitigation measures for the entire corporate group. This new regime assigns responsibility with the agent responsible for creating the emissions policies. It also substantially reduces the incentives of parent corporations to externalise costs. The Hague District Court’s liability model is also extendable to the Indian context as it fits well with the historical Indian position with respect to corporate liability for environmental torts. In all, there is a case for this emissions liability model to be generally adopted.