High Court decision quashing permission for UK coal mine addresses assessment of scope 3 emissions, substitution and offsetting

In the first judgment to consider and apply the Supreme Court's landmark decision in Finch, the High Court has quashed planning permission for the Whitehaven coal mine (Friends of the Earth v SoS for Levelling Up, Housing & Communities & others; South Lakeland Action on Climate Change v SoSLUHC & others [2024] EWHC 2349 (Admin)). In doing so the court considered arguments relating to substitution and reliance on carbon offsetting.

Key Points

• In cases where combustion is an inevitable consequence of mineral extraction, the GHG emissions from that combustion must be assessed as part of the EIA process, in line with the Finch decision. 
• In other cases, the assessment of whether an effect is "likely" such that it requires assessment under the EIA regime will depend on the evidence. If a lack of evidence means that a possible effect is a matter of conjecture or speculation, or there is insufficient evidence to found a reasoned conclusion that a possible effect is “likely”, there is no requirement for that effect to be identified and assessed.
• The developer relying on the substitution argument needed to produce full information on how that balanced out or offset GHG emissions in a way that allowed the public to respond to that information via the EIA process. This included needing to show a very high degree of substitution not far short of perfect substitution, and that there would be no other demand for the product said to be substituted.
• The decision maker must properly grapple with important issues raised during the process such as whether non-UK offsetting can be used to meet UK carbon budgets.

Background

In 2022 the Secretary of State for Levelling Up, Housing and Communities ("SoS") granted planning permission to West Cumbria Mining Limited ("WCM") for the first deep coal mine in the UK for 30 years at Whitehaven, Cumbria (the "Project"). WCM had described the Project as a "net zero mine" on the basis that it would compensate for emissions generated from the mine by carbon offsetting. 

Friends of the Earth ("FoE") and South Lakeland Action on Climate Change – Towards Transition (“SLACC”) brought statutory review proceedings seeking to have the planning permission quashed. The central focus of the challenge was on the way the SoS addressed greenhouse gas (“GHG”) emissions resulting from the proposed extraction of coal and their effects on climate change.

Judgment

A number of significant issues of broader relevance fell for consideration by the court.

1. Whether the SoS' decision that GHG emissions from the burning of Whitehaven coal were not a "significant likely effect" of the Project, such that they did not require assessment under the Environmental Impact Assessment ("EIA") regime, was unlawful (i.e. the same main issue addressed in Finch).

Since the hearing in this case took place after the Finch judgment the parties had been able to amend their arguments in the light of Finch. The SoS had accepted that the permission was unlawful, and therefore no longer defended the planning permission, but WCM continued to defend the litigation.

Holgate J noted that here, as in Finch, it was common ground that the burning of the Whitehaven coal is an inevitable consequence of its extraction from the mine. Therefore, following Finch, it was clear that the emissions from that combustion were significant likely effects of the Project that should have been assessed as part of the EIA process, and taken into account by the SoS before deciding whether or not to grant planning permission. In this case that was sufficient to conclude that the decision was unlawful.

However, in other cases Holgate J noted that a determination of whether a potential effect is “likely” requires evidence on which to base that decision, so if "a lack of evidence means that a possible effect is simply a matter of conjecture or speculation, then it would not be possible rationally to conclude that it is “likely.” …if there is insufficient evidence available to found a reasoned conclusion that a possible effect is “likely”, there is no requirement for that effect to be identified and assessed."

2. Whether the conclusion that the Project would have a neutral or beneficial effect on global GHG emissions as a result of substitution was unlawful.

WCM had argued that emissions from the burning of Whitehaven coal would not give rise to any material additional emissions, because Whitehaven coal would replace coal otherwise being supplied from US coal mines to the UK and European steel-making market. In essence WCM submitted that if coal is extracted at Whitehaven then a broadly equivalent amount of coal will remain in the ground in US mines.

Part of FoE and SLACC’s case was that the extraction of coal at Whitehaven would increase the supply of that type of coal in the market so that its price would decrease, and likewise the price of steel, leading to an increase in demand.

Holgate J started by clarifying that WCM had the burden of establishing that there would be no net increase in GHG emissions as a result of the US coal substitution effect upon which it relied. It needed to produce full information on how that balanced out or offset the GHG emissions in a way that would allow the public to respond to that information via the EIA process. WCM would have had to show a very high degree of substitution not far short of perfect substitution, and, if that was shown, also that there would be no other demand for US coal substituted by the Whitehaven coal. Neither of these were addressed by WCM's environmental material, nor was it suggested that these were matters incapable of assessment.

Holgate J clarified that the issue of substitution was legally distinct to the first issue of whether GHG emissions were a significant likely effect of a development. WCM's argument that the fact that there would be no net increase in emissions meant there was no significant likely effect requiring EIA assessment would mean no assessment would need to be made at all in relation to the combustion of the Whitehaven coal or the substitution of that coal for US coal. In Holgate J's view that "would be absurd. Instead, the correct analysis is that both are significant matters and, if substitution of US coal would be a likely effect of the proposed project, both effects had to be assessed".

During the decision-making process the Planning Inspector and SoS did not entirely accept WCM's submissions on the substitution issue. For example, WCM argued there would be a reduction in GHG emissions because coal would be transported over a short distance rather than coming from a US mine. However, the Inspector noted that any transport reductions would be offset if Whitehaven mine was transported to wider markets.

The court found inconsistency and lack of clarity in the findings on this issue within the decision documents, although it was clear that the decision-makers did not reach a consistent view that there would be the near perfect substitution required. Nor did the SoS address the issue raised by FoE and SLACC as to the increased demand in Asia for the US coal, meaning it was not clear that the US coal would remain in the ground.

Ultimately Holgate J concluded that the SoS' handling of the substitution issue was legally flawed.

3. Whether the SoS failed to have regard to evidence and submissions on the impact of a decision to grant planning permission for the coal mine on the ability of the UK to perform its leadership role in promoting international action to address climate change.

The claimants' argument here had two main strands:

• the mine would result in a substantial net increase in GHG emissions and would therefore set a bad precedent internationally for the development of coal mines elsewhere in the world;
• even if the SoS were to accept that Project would operate as a net zero mine, that would still be a harmful precedent, because any further mining projects of the same nature would depend upon the offsetting of GHG emissions, in circumstances where offsets are a finite global resource.

Holgate J accepted that these were principal controversial issues on which the SoS had a legal duty to give reasons explaining how they had been resolved. Looking at the decision documents, it appeared that the main rebuttal to these points was the Inspector and SoS' conclusion that this was to be a "net zero" mine which "would set a benchmark to which other mineral extraction developments should aspire". However, since that claim had been shown to be legally flawed under the previous issues considered by the court, it followed that this assumption was also legally flawed. The SoS failed to grapple with the issues raised by the claimants because of the flawed reliance on the net zero mine approach.

4. Whether the SoS erred in law in the treatment of WCM’s proposed scheme for offsetting GHG residual, mitigated emissions from the coal mine itself.

The SoS accepted the offsetting arrangements entered into by WCM, involving the purchase of credits in the voluntary carbon market, as reducing the net change in GHG emissions from the operation of the mine to zero. WCM claimed that the emissions, once offset, would represent 0% of the UK’s national carbon budgets.

FoE submitted that the domestic legislation relating to carbon accounting for the purposes of compliance with those budgets does not allow offsets from outside the UK to be taken into account, and relied on a number of policy documents advising that UK emissions must be tackled without reliance on offsets from outside the UK. However, this submission was not addressed during the decision-making process.

Again, the application of UK policy to the offsetting proposed by WCM to support its net zero claim was described by the court as “a principal important controversial issue” which attracted a legal obligation on the part of the SoS to give reasons, as well as being an obviously material consideration to the assessment of WCM’s “net zero mine” case. The failure to address this established a legal ground for quashing the decision. Further, Holgate J agreed with the claimants that deliverability of the offsetting arrangements proposed by WCM was a relevant planning consideration which the SoS had to take into account.

Comment

Following Finch and the resulting acceptance from the SoS that emissions from the combustion of the coal produced by the mine should have been assessed, the result in this case comes as no surprise. It is the comments made by Holgate J on the other issues that will be of broader interest, particularly the guidance as to what developers seeking to rely on a substitution argument need to do.

It is important to remember that the court has not disavowed substitution, but simply clarified that full information and separate assessment is needed from the developer along with proper consideration by the decision maker. Similarly, the grounds relating to offsetting and the international impact of granting permission were upheld on the basis of a lack of proper reasoned consideration by the SoS, rather than on a more substantive basis. As the body of caselaw in this area grows, it will be important for all parties to understand exactly what the implications of each new decision are.