Supreme Court issues landmark decision requiring assessment of Scope 3 emissions

The Supreme Court has delivered its highly anticipated judgment in R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others [2024] UKSC 20. It has held, by a majority, that emissions resulting from the eventual use of refined products from a proposed oil development, known as downstream emissions, should have been assessed in the environmental impact assessment process. The case will have a significant impact on future applications for similar developments.

Key Points

• Downstream emissions can constitute a likely significant environmental effect of a project if causation can be established. Here it was "inevitable" that oil produced would be refined and burnt as fuel, producing emissions.
• The ability to estimate and quantify such emissions will be relevant to the requirement to assess these emissions as part of the EIA process.
• The question of whether such emissions constitute an effect to be assessed for EIA purposes is a matter of law, not evaluative judgment for local planning authorities.

Background

The Appellant campaigner challenged a decision made by Surrey County Council (the "Council"), granting planning permission to Horse Hill Developments Ltd for the retention and expansion of an oil well site. The existing oil well site comprises two wells and permission was granted for four new wells (the "Oil Well Development"), which would have enabled the production of hydrocarbons from six wells over a period of 25 years.

Following the grant of planning permission in 2019, the Appellant applied for judicial review of the Council's decision. Both the High Court and the Court of Appeal dismissed the Appellant's claim.

The current appeal was heard by a panel of five judges in the Supreme Court in June 2023. Joining the Council as respondents were Horse Hill Developments Ltd and the Secretary of State for Levelling Up, Housing and Communities, who supported the position that the Council's decision was lawful.

Reflecting the importance of, and widespread interest in, the case, Friends of the Earth Ltd, Greenpeace Ltd, the Office for Environmental Protection ("OEP") (making the first use of its power to intervene), and West Cumbria Mining Ltd intervened. The first two intervened in support of the Appellant's claim, whereas the latter intervened in support of the Council and Horse Hill Developments Ltd. The OEP did not take sides between the parties but explained its concern that the lower courts' decisions could have an adverse effect on environmental decision making and protection.

Issues

The primary issue in the case was whether the Council acted lawfully in granting planning permission for the Oil Well Development under the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 ("the EIA Regulations"), which implement an EU Directive in the UK ("the EIA Directive"). The Appellant argued that the environmental impact assessment ("EIA") for the Oil Well Development should have included an assessment of the impacts of downstream greenhouse gas ("GHG") emissions resulting from the eventual use of the refined products of the extracted oil (also commonly referred to as "Scope 3 emissions"). Although the EIA carried out did consider the environmental impacts of "the direct releases of greenhouse gases from within the well site boundary resulting from the site's construction, production, decommissioning and subsequent restoration over the lifetime of the proposed development", it did not consider any environmental impacts of downstream emissions.

The High Court concluded that these emissions were “incapable of falling within the scope of the EIA”, focusing on “whether an effect on the environment is an effect of the development for which planning permission is sought”. The scope of that obligation was not said to include the environmental effects of consumers using (in locations which are unknown and unrelated to the development site) an end product which will be made in a separate facility from materials to be supplied from the development being assessed.

The Court of Appeal reached the same eventual outcome but on a different basis, holding that such emissions were capable of being “direct and indirect significant effects" of the proposed development. What needed to be considered was the necessary degree of connection between the project, or development, and its putative effect, be it direct or indirect. This, the majority in the Court of Appeal concluded, was ultimately a matter of fact and evaluative judgment for the authority, challengeable on public law grounds only.

Supreme Court Judgment

The Supreme Court allowed the appeal by a majority of three to two and quashed the planning permission on the basis that (i) the EIA for the project failed to assess the effect on climate of the combustion of the oil to be produced, and (ii) the reasons for disregarding this effect were flawed.

Causation

Central to the reasoning for allowing the appeal was the fact that it was "inevitable" that all the oil produced from the development would be refined and undergo combustion, with that combustion producing GHG emissions. There was no dispute about this proposition – it followed from the agreed facts in the case. Therefore, not only was the usual "but for" causation test fulfilled, but there existed the strongest possible form of causal connection.

The fact that there would need to be an intermediate step before the crude oil produced from the site could be used as fuel, namely refinement, was not said to have the legal significance argued by the developer who pointed out that a refinery was a project itself requiring an EIA. The process of refining crude oil does not alter the basic nature and intended use of the commodity. It is a process which it is always expected and intended that the oil will undergo - and which it was agreed that the oil produced here would inevitably undergo. In those circumstances it would be "unreasonable to regard it as breaking the causal connection between the extraction of the oil and its use". 

The Supreme Court was not persuaded that the need to focus on the environmental effects of the project itself affected these conclusions. All effects of the project, direct, indirect, immediate or remote, must be included. It does not follow that because the downstream emissions are effects of some other activity, such as the refinement of the oil or its subsequent use as fuel by consumers, they cannot also be effects of the project of extracting the oil.

Quantification

It was also relevant that an estimate of the eventual emissions could easily be quantified using established methodologies. In fact, the Council had performed this task and provided a witness statement to this effect. Lord Leggatt (with whom Lord Kitchin and Lady Rose agreed), giving the majority judgment, compared the estimate for the combustion emissions (10.6 million tonnes) with that included in the EIA (140,958 tonnes), and noted that the EIA had described the effect on the total UK carbon budget to be "negligible". He went on to comment that had the combustion emissions been included in the assessment, "the figure for GHG emissions attributable to the project could not have been dismissed as “negligible” in that way". 

A matter of law or judgment?

The Supreme Court rejected the Court of Appeal's position that the question of whether such emissions must be assessed is a matter of evaluative judgment for an individual planning authority to assess. Notably the OEP had emphasised the importance of avoiding inconsistent decisions by planning authorities and decision-makers under the EIA regime. The Supreme Court shared these concerns, noting that this would be a "very unsatisfactory state of affairs"…"all the more regrettable when issues relating to climate change and the extent to which disclosure of information about GHG emissions should be required are becoming more and more salient in policy-making and public debate". This unreasonable result was said to be a good reason itself to reject the Council's interpretation of the EIA regime. More fundamentally, the answer to such an important question concerning the application of the EIA Directive should be determined according to the terms of the Directive, read in the light of the purpose and scheme of the Directive. It is a matter of law capable of only one answer.

The legislative regime requires an EIA to cover "any indirect, secondary, cumulative, short, medium and long term, permanent and temporary, positive and negative effects of the development". The judgment noted that it "would be hard to devise broader wording than this". No geographical limit is imposed on the environmental effects of a project which must be assessed. If they are likely significant effects they must be assessed regardless of where or when those effects will be felt. There is no justification for limiting the scope to effects at or near the project site. Nor does it matter if the effect would be felt outside the territorial jurisdiction of the state, here the UK. Lord Leggatt reflected that "Climate change is a global problem precisely because there is no correlation between where GHGs are released and where climate change is felt. Wherever GHG emissions occur, they contribute to global warming. This is also why the relevance of GHG emissions caused by a project does not depend on where the combustion takes place."

On a similar vein, the express wording of the EIA regime and the legal requirements that arise from a proper interpretation of that regime are not affected by national planning or climate change policy. The judgment dealt with an argument that climate change matters should properly be dealt with at the national, rather than local, level by refusing to accept that it would be wrong for a local planning authority to take into account a contribution to global warming through fossil fuel extraction. UK national policy requiring weight to be given to the benefits of petroleum extraction must also be taken into account, but it does not therefore follow that adverse effects on climate change should be ignored. In any event such policy is irrelevant to the proper interpretation of the legislation.

Scope of the judgment

There had been much discussion in advance of the fear of the floodgates being opened if it was accepted that downstream emissions had to be assessed in this way, with potential ramifications beyond the production of crude oil.

Lord Leggatt described these concerns as misplaced. He distinguished other types of commodity such as iron or steel which have many possible uses in many different types of end product. In relation to manufacturing components for use in the construction of motor vehicles or aircraft, it may be that the contribution of the component to the end product would not be sufficiently material to justify attributing the environmental impact of the end product to the component part. It may also be that no realistic estimate could be made of GHG emissions arising from this kind of end use given there may not be certainty about the number of vehicles or aircraft into which parts would ultimately be incorporated. The EIA process does not require attempts to be made where effects are incapable of such assessment.

The same cannot be said for combustion emissions from oil, since the refining process is not akin to using a product in the creation of something else, as in manufacturing. Indeed, when considering the example of coal which does not require any intermediate process before being burnt as fuel, the Supreme Court specifically commented that it is not rational to distinguish between downstream emissions from different fossil fuels on this basis.

Dissenting views

Lord Sales and Lord Richards did not agree with the views of the majority and Lord Sales delivered a lengthy dissenting judgment.

It was noted that Scope 3 or downstream GHG emissions are addressed at the level of national policy, and Lord Sales expressed the view that it would be constitutionally inappropriate for a local planning authority to assume practical decision-making authority based on its own views regarding Scope 3 or downstream emissions and how these should be addressed in a manner which would potentially be in conflict with central Government decision-making and its ability to set national policy. The dissent did not agree that the natural interpretation of the EIA Directive included downstream emissions as effects "of the project". Attention was also drawn to the fact that there is no jurisprudence of the CJEU which indicates that the “indirect effects of a project” include downstream or Scope 3 greenhouse gas emissions. Given the long period of time involved since the promulgation of the relevant Directives, the absence of such indications was thought to be significant.

Lord Sales cautioned that while the EIA Directive, interpreted according to its terms, has a valuable role to play in relation to mitigating GHG emissions associated with projects for which planning permission is sought, it should not be given an artificially wide interpretation to bring all downstream and Scope 3 emissions within its ambit as well.

Even the dissenting judgment did agree however that this was a matter of law, and not a matter of judgment for the local planning authority.

Comment

This long-awaited Supreme Court decision comes hot on the heels of other significant court decisions in the climate change context, most notably the highly publicised Swiss decision from the European Court of Human Rights and a recent domestic decision finding the Government's climate change plan unlawful. The courts appear willing to go further than before to enforce existing legal obligations relating to climate change and the environment.

This decision could have a significant impact on developers looking to bring forward similar projects. However, the effects of the decision will be limited to similar projects which result in an end-product which will then inevitably give rise to other quantifiable effects when used. For most development projects to which the EIA Regulations apply this will not be relevant.

In making the decision to allow the appeal the Supreme Court has been careful to clarify the scope of its application when addressing the arguments in relation to the risk of the floodgates being opened, particularly for other manufacturing or industrial process types of development. Whilst judgement will be required in relation to what level of assessment is required, the decision is clear that the EIA process does not require that attempts be made to measure or assess putative effects which are incapable of such assessment. Care will therefore need to be taken that an overly precautious approach is not applied, which can typically be the reaction to such a decision. 

Whilst narrow in scope, the decision will nonetheless undoubtedly give rise to increased scrutiny and/or challenge on issues which relate to indirect significant effects, causation and how to mitigate such an indirect risk. In that context, professional advisers will now need to be advising how (and within what parameters) to take into account and report on Scope 3 emissions in EIAs for relevant projects, including on the extent to which such effects are quantifiable and should be subject to assessment.