UK Supreme Court Forces Impact Assessments to Account for Scope 3 Emissions

The United Kingdom’s Supreme Court has issued a new ruling in a planning law case concerning the climate impact considerations for new oil wells. In a 100-page ruling in R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others (Finch), a three-to-two majority held that Surrey County Council had acted unlawfully by not accounting for downstream greenhouse gas emissions when approving a new oil development project.

This article provides an overview of the background in Finch, the legal issues, the lower court decisions, the Supreme Court’s judgment and finally the ruling’s implications.

References to paragraphs below are references to the full Supreme Court judgment, which can be found here.

Background

Finch involved Horse Hill Developments Ltd., which had applied to Surrey County Council for the development of four new oil wells and expansion of oil production from an existing oil well at Horse Hill in Surrey. The application involved a 25-year project, during which an estimated 3.3 million tonnes of oil could be produced.

Under applicable law in the United Kingdom, the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the 2017 Regulations), an environmental impact assessment is required to obtain approval for new development projects. The 2017 Regulations transposed Directive 2011/92/EU of the European Parliament and of the Council, as amended by Directive 2014/52/EU into United Kingdom law (EIA Directive). More specifically, an environmental impact assessment must “identify, describe, and assess in an appropriate manner … the direct and indirect significant effects of the proposed development” on various factors, including climate.

Yet, in Finch, the environmental impact assessment for the project considered the environmental impact of the site’s construction, production, decommissioning and restoration over the project’s lifetime, focusing solely on the production process and on-site activities. However, it did not assess the greenhouse gas emissions from refining and using the extracted oil elsewhere (downstream or ‘Scope 3’ emissions). Surrey County Council accepted this limited assessment and approved the project. Sarah Finch challenged this decision, arguing that the downstream emissions should have been considered in the project’s impact assessment.

Both the High Court and the Court of Appeal initially upheld Surrey County Council’s decision, although the Court of Appeal did so with reservations. The Court of Appeal disagreed with the High Court’s reasoning, noting that while downstream impacts were not legally excluded from consideration, the degree of connection between the development and its effects should be judged on a case-by-case basis by the planning authority.

Legal Issues

The core issue in this case revolved around whether the climate impacts from the combustion of oil extracted from the proposed and expanded wells should be considered part of the “effects of the proposed development” under the 2017 Regulations, thus requiring inclusion in the environmental impact assessment (§52-53). The developer had only addressed direct greenhouse gas emissions from within the well site boundary, excluding downstream emissions. The appellant’s primary argument was that the 2017 Regulations mandated an assessment of the combustion emissions from the produced oil.

Lower Court Decisions

The High Court, with Justice Holgate presiding, dismissed the claim. Holgate J acknowledged that it was inevitable that the oil would be refined and combusted, producing GHG emissions. However, he had concluded that – as a matter of law – assessing these emissions fell outside the scope of an environmental impact assessment required by the 2017 Regulations. Alternatively, he considered that if it would be in-scope to include these emissions, the council’s decision to exclude them was neither irrational nor unlawful in this situation (§45-46).

The Court of Appeal, by majority, upheld the High Court’s decision, albeit on different reasoning. The majority disagreed with Holgate J’s legal assessment, asserting that the combustion emissions could be considered effects requiring assessment if there was a sufficient causal connection. They saw this determination as a matter of fact and evaluative judgment for the council. The majority also found the council’s exclusion of combustion emissions reasonable and lawful (§47). Moylan LJ dissented on this part, arguing that the council needed more compelling reasons to exclude downstream emissions and that their provided reasons were flawed (§48).

The Supreme Court Judgment and Dissenting Opinion

The Supreme Court’s majority opinion, delivered by Lord Leggatt with the agreement of Lord Kitchen and Lady Rose, found that downstream greenhouse gas emissions from the burning of the oil were a direct and inevitable consequence of the project. Key points from the majority judgment included:

1. Inevitability of Emissions: The majority judgment recognised that the oil produced at the Horse Hill site would inevitably be refined and combusted, leading to greenhouse gas emissions. This acknowledgement emphasises a direct causal link between the project and the resulting emissions, establishing that oil extraction was both a necessary and sufficient condition for its combustion. This causal chain goes beyond the well-known ‘but for’ test for causation, indicating that emissions were an inevitable outcome (§65-92).
   

2. Alternative Providers: The Supreme Court rejected the notion that if oil would not be extracted from the Horse Hill site it would lead to an increase in extraction elsewhere (§2) – a favourite fossil fuel argument.
   

3. Geographical Scope: The judgment asserts that the EIA Directive imposes no geographical limits on the effects of a project, rejecting the principle that exported environmental harm can be ignored. This underscores that climate change is a global issue, and emissions must be considered regardless of their location. The court emphasised that the transboundary nature of environmental impacts, particularly greenhouse gas emissions, necessitates a comprehensive assessment that includes effects occurring beyond the project’s immediate vicinity (§93-100). The opinion on geographical scope is summarised nicely in the judgment as follows: “An impact is not precluded from being an effect of a project by the fact that its immediate source is another activity that occurs away from the project site […] [and] it is in the very nature of ‘indirect effects that they may occur […] away from the place where the project is located” (§102).
   

4. Public Participation: The judgment highlights that the primary goal of an environmental impact assessment is to ensure that decisions are made with full knowledge and public awareness of the environmental consequences. This emphasis on informed decision-making and public participation was a recurring theme in the judgment. Lord Leggat wrote, “[y]ou can only care about what you know about” (§21), to underscore the importance of public participation requirements.
   

5. National Planning Policy: The judgment dismisses the relevance of the current national planning policy (which favours mineral extraction to stimulate the United Kingdom’s economy) in determining the scope of the environmental impact assessments. Local planning authorities cannot justify limiting the scope of an environmental impact assessment based on assumptions that regulatory controls will sufficiently manage environmental impacts (§107-108, §151).

In contrast, the dissenting opinion, led by Lord Sales, presented several counterarguments:

1. Scope of the EIA Directive: The dissent argued that downstream emissions should be addressed by national policy rather than local planning authorities (§253, §256-257). The EIA Directive does not categorise downstream emissions as indirect effects, and thus Lord Sales is cautioning against double-counting of emissions in different contexts (§263). He also suggested the term “indirect effects” should be interpreted narrowly, indicating that downstream emissions are too remote to be considered effects of the project (§260). The EIA Directive could have explicitly included such emissions but did not (§182).
   

2. Proportionality and Coherence: Lord Sales expressed concerns about the proportionality and coherence of requiring different planning authorities and member states to independently assess downstream emissions, which could lead to inconsistent and disproportionate assessments (§260, §262).

National and International Implications

• National Implications

According to Marc Willers KC, who represented Sarah Finch with Garden Court Chambers, the Supreme Court decision is “a fantastic victory for the planet because it is bound to have an impact on fossil fuel extraction”. In fact, at least two cases with downstream emissions arguments in planning permissions are pending, concerning the Whitehaven project in Cumbria and the Rosebank project in the North Sea. The decision will also impact future planning decisions, as Marc Willers KC puts it, “[p]lanning authorities will now be required to face up to the fact that fossil fuel extraction will inevitably lead to an increase in global warming […] before deciding whether to grant planning permission for such a project”.

• International Implications

The Supreme Court’s decision can potentially influence jurisdictions within the European Union, where the EIA Directive is applicable, and beyond. The landmark ruling may thus prompt similar legal interpretations and stricter environmental assessments for fossil fuel projects worldwide, aligning local planning decisions with global climate commitments.