A week on from Finch – a bird's eye view on potential implications and unresolved questions

Just over a week ago the Supreme Court handed down its decision in the case of R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others [2024] UKSC 20, holding that the environmental impact assessment (EIA) for an onshore oil well site was flawed as it had not taken into account emissions from the eventual combustion of oil produced at the site – the "downstream" or "scope 3" emissions.

We have already summarised the Court's findings in our earlier blog post on ESG Notes here. Now, having mulled what is a lengthy judgment (100 pages) which the judges themselves pored over for almost a year before handing down, we set out below some further thoughts beyond the headlines.

Don't panic!

While Finch is doubtless an important decision as regards climate considerations in the planning process, its practical impact is likely to be limited to developers promoting schemes with a clear and readily evidenced link to eventual emissions – and even for these projects, Finch does not mean that they must be refused consent.

EIA is procedural

First, it must be remembered that the EIA process is outcome-agnostic – it requires that effects of the project be assessed and taken into account by the decision-maker, but the existence of likely significant effects on the environment does not prevent a project being consented (acknowledged by Lord Leggatt at eg. [62]). Indeed, Lord Leggatt, for the majority, emphasised the procedural nature of the EIA Directive and that its central function is to educate and ensure public participation in decision-making [21, 63, 105, 152]. Therefore, even if a project's post-Finch EIA were to include significant scope 3 emissions and offer little by way of mitigation (as would likely be the case for scope 3 emissions), the decision-maker may still rationally decide to grant consent – potentially placing weight on national policy on the sector and economy-wide management of emissions.

Of course, how this analysis holds up if the next government presses ahead with the mooted "Environmental Outcome Report" regime pursuant to the Levelling Up and Regeneration Act 2023 is anyone's guess, but the concern is that Finch has inadvertently laid the groundwork for scope 3 emissions to be brought into a more outcomes-focused regime that might be around the corner.

Effects must be capable of assessment

The judgment also offers potential arguments to developers whose projects have a less clear link to ultimate emissions. Lord Leggatt was clear that what constitutes an "effect" of a project is a question of causation with only one lawful response, but whether a possible effect is supported by sufficient information to be "capable of assessment" such that it necessarily forms part of the EIA is a matter "on which different decision-makers, each acting rationally, may take different views" [78]. The majority suggested, obiter, that if there was "insufficient information available on which to make a reasonable assessment of the relevant impacts" or it was possible to judge that "such impacts were not themselves likely to be significant", those impacts may not need to be assessed [138]. For projects where downstream emissions are less readily tied to the project's output than is the case for fossil fuel extraction, this may support a decision not to assess effects for which it is decided that no meaningful assessment can be undertaken.

Unresolved questions

However, the judgment inevitably gives rise to questions – most pertinently regarding the potential scope of its application.

Standard of causation

A key question likely to feature in subsequent cases is the standard of causation required between a project and an effect. Lord Leggatt discussed various formulations of causation, from the "but for" test (that Y would not have occurred but for the occurrence of X) to X needing to be both a necessary and sufficient condition for the occurrence of Y (ie every time X occurs, Y occurs) [67-71]. Ultimately, because it was an agreed fact in Finch that oil extracted would inevitably be burned, the majority did not decide a minimum required standard. Commentary on this question has been mixed, though we consider that it is arguable that the standard should be towards the stricter end of the scale – in distinguishing a steel factory, Lord Leggatt said that "the manufacture of steel is far from being sufficient to bring about [emissions of end products]" [121] (emphasis added), using the language of the stricter test he discussed earlier.

Opening the floodgates?

While the judgment will clearly affect extractive fossil fuel projects, an immediate question is how much wider its potential scope could be. Within the fossil fuel sector alone, would an oil or gas storage terminal need to assess the downstream emissions of all oil or gas it expected to store during its lifetime? How about an oil or gas pipeline as regards all oil or gas it expected to transport? The fact that an EIA had already been undertaken for the emissions from those fossil fuels for the extractive project or a subsequent step such as a refinery (if that were the case) would not be a sufficient excuse, as Lord Leggatt made clear that the same environmental effects can be assessed for multiple projects [125].

The majority was keen to stress that their judgment would not open the floodgates, as had concerned Holgate J in the High Court. Addressing the example of a facility producing raw materials such as steel, the majority held that the indeterminacy of the future use to which a material such as steel would be put makes it impossible to identify end-use emissions as "likely" or make a meaningful assessment of them [121]. Oil was said to be "a very different commodity".

Addressing the example of a factory manufacturing components for motor vehicles or aircraft, Lord Leggatt observed that "[w]here a component is manufactured which forms a small part of a much larger object… the view might reasonably be taken that the contribution of the component is not material enough to justify attributing the impact on the environment of the end product to the activity of manufacturing the component part".

These indications are helpful, but not comprehensive. Projects can be envisaged where these arguments would be harder to make, such as a steel plant built solely to supply an automobile manufacturer or a manufacturing facility exclusively for internal combustion vehicles. In such cases, would there still be sufficient "indeterminacy" to prevent meaningful assessment?

For these questions and more, it is a case of "watch this space" as the lower courts grapple with the Supreme Court's reasoning and attempt to find a workable way through.