The Supreme Court has released its ruling in R (on the application of Finch) v Surrey County Council [2024] UKSC 20; [2024] PLSCS 114 after around a year of deliberation. The judgment concluded that scope 3 emissions must be considered as an indirect environmental effect and as part of the environmental impact assessment of planning applications.
Background
In 2019, planning permission was granted for the retention and extension of the existing well site at Horse Hill, Hookwood, Horley, Surrey, and to allow the drilling of four new hydrocarbon wells. The environmental statement only assessed the direct impact of the greenhouse gas emissions.
The claimant, Sarah Finch, started judicial review proceedings arguing that the council had failed in its legal duty to consider the indirect environmental impact caused by the downstream GHG emissions (known as scope 3 emissions).
The High Court ruled that the environmental statement should only address the environmental effects of the development for which planning permission is sought and that the downstream GHG emissions were not one of them.
Finch appealed, but the Court of Appeal ruled by majority that the planning permission was lawful. However, it considered that downstream GHG emissions could be an indirect environmental effect of a development, but this would need to be determined on a case-by-case basis by the planning authority.
The Supreme Court ruling
On Finch’s further appeal, the Supreme Court has, by a majority, ruled that the council’s decision to grant planning permission without assessing combustion emissions (scope 3) was unlawful, as these are indirect effects of the project.
The view of the Court of Appeal, which was that the inclusion of scope 3 emissions needs to be determined on a case-by-case basis, was unanimously rejected. The Supreme Court concluded this would lead to inconsistent situations where one planning authority would require scope 3 emissions to be included while another planning authority would not require it for a similar project.
This interpretation of the EIA Directive was deemed unreasonable.
The council’s decision to confine the EIA to emissions from the red line boundary of the project was also rejected as the EIA Directive does not impose any geographical limit on the scope of the environmental effects of a project that must be assessed.
An argument was raised providing that the emissions could not be regarded as an effect because the crude oil is not burnt, but instead what is burnt is the end product, which is refined in facilities owned by third parties.
However, the Supreme Court rejected this argument, as it was considered that the refinement did not break the causal connection between extraction and combustion.
Another argument was raised providing that considering scope 3 emissions would make the EIA onerous and unworkable for many industries, as it is not possible to determine how the products would be used by downstream users. The Supreme Court chose not to address this argument concerning other industries and instead relied on the special characteristics of oil:
“Oil is a very different commodity. There is no element of conjecture about what will ultimately happen to the oil; refining the oil does not change it into a different type of object (unlike the incorporation of a part in a motor vehicle or aircraft); and a reasonable estimate can readily be made of the emissions that will occur upon its inevitable combustion.”
Dissenting from the majority ruling, Lord Sales considered that local authorities should not assess downstream emissions, which should instead be addressed by national policy and not considered indirect effects of a project. He also added that the EIA Directive considered indirect effects “of the project”, which on a natural reading cannot include downstream emissions.
Implications
This ruling represents a substantial change for all new hydrocarbons projects in the UK, as new projects will need to consider from their inception not only the emissions from their facilities (scope 1) and energy consumption (scope 2), but also emissions from downstream users that burn the oil (scope 3).
The outcome of this case will have implications for environmental decision-making and protection, particularly in relation to climate change and GHG emissions. A clear consequence is that there will be a drastic increase in the cost and mitigation requirements in EIAs for the oil sector as the combustion of oil will also need to be considered.
As the ruling heavily relies on the particular characteristics of oil, it seems that this crucial ruling is in principle limited only to the oil and gas industry.
Extending this ruling to other industries seems unlikely, unless it is proven that a “reasonable estimate can readily be made” of the emissions that will occur on the use of that industry’s products by their downstream users, and that there is “no conjecture” about the production of these emissions, which is quite a high bar.
Stefano D’Ambrosio Nunez is a solicitor at Irwin Mitchell
