UK Supreme Court rules that downstream emissions of fossil fuel projects must be assessed before granting planning permission

On 20 June 2024, the UK Supreme Court handed down its long-awaited judgment in R (on the application of Finch on behalf of Weald Action Group) (Appellant) v Surrey County Council and others (Respondents). The Court held by a 3-2 majority that Environmental Impact Assessments carried out in relation to fossil fuel projects must include an assessment of downstream greenhouse gas emissions, including those produced during combustion.  

Background

Finch concerned a judicial review of Surrey County Council’s (the Council) 2019 decision (the Decision) to grant planning permission to expand oil production and add new wells to an existing onshore oil well site in Surrey (the Project). Pursuant to the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the Regulations), which implemented EU Directive 92/11/EU (as amended) (the Directive), the Council was required to carry out an Environmental Impact Assessment (EIA) prior to granting planning permission for the Project. An EIA must consider both the “direct and indirect significant effects” of development proposals on, among other factors, the climate. In Finch, the EIA carried out in relation to the Project only considered the effects of greenhouse gas (GHG) emissions at the Project site during the lifetime of the Project; the EIA did not include an assessment of the GHG emissions that arise when the extracted oil is refined and ultimately burnt (i.e. the scope 3 ‘combustion’ emissions). 

The Claimant, a local resident representing a campaign group, applied for a judicial review of the Decision on the grounds that the Council had failed to assess all of the Project’s combustion emissions as part of the EIA as was required by the Regulations, and therefore the Decision was unlawful.  

Decisions of the lower courts

The High Court rejected the Claimant’s challenge at first instance on the basis that combustion emissions are not properly regarded as an “indirect effect” of a project and therefore do not fall within the scope of EIAs under the Regulations. In the alternative, the High Court held that whether to undertake an assessment of such emissions was a matter of evaluative judgment for the Council, and the Council had given legally valid reasons for excluding combustion emissions from the EIA. 

The Court of Appeal upheld the High Court’s decision but on the basis of the High Court’s alternative reasoning. The Court of Appeal found that whether combustion emissions constitute “effects” of a project is a matter requiring an evaluative judgment as to whether a sufficient causal connection exists between the extraction of the oil and its eventual combustion, on which different competent authorities could reasonably reach different conclusions. The Claimant appealed to the Supreme Court.

Judgment

By a 3-2 majority, the Supreme Court allowed the appeal. The Supreme Court held that combustion emissions were “effects of the project” within the meaning of the Regulations and therefore the Council’s failure to assess them as part of the EIA rendered the Decision unlawful. 

The Supreme Court unanimously rejected the Court of Appeal’s reasoning, considering the approach taken by the Court of Appeal to be “a recipe for unpredictable, inconsistent and arbitrary decision-making”. Instead, the Supreme Court unanimously agreed that the question of whether combustion emissions fall within the scope of the EIA is a question of legislative interpretation which only has one answer, and does not require an evaluative judgment by the decision-maker. However, disagreement arose regarding what that one answer was.

Majority decision (Lord Leggatt, Lord Kitchin and Lady Rose)

Giving the lead decision for the majority, Lord Leggatt found that whether something is to be classed as an effect of a project is a question of causation. In adopting a wide interpretation of “effects of the project” to encompass combustion emissions, Lord Leggatt appealed to the broad wording of the Directive, which provides that an EIA should cover not only the direct effects of a project but also “any indirect, secondary, cumulative, transboundary, short-term, medium-term and long-term, permanent and temporary, positive and negative effects of the project.” 

Lord Leggatt held that it was “inevitable” that oil extracted at the Project site would eventually undergo combustion and that there was therefore a causal chain between the oil’s extraction and the combustion of the oil, alongside the corresponding release of GHG emissions into the atmosphere. Due to this causal link, Lord Leggatt held that the GHG emissions produced from eventual combustion are “effects of the project”, which must be assessed as part of the EIA.

In reaching this conclusion, Lord Leggatt made several key findings:

• Geographical scope: The legislation does not impose a geographical limit on the scope of the environmental effects of a project which must be assessed in an EIA. The Council was therefore wrong to confine its scope of assessment to effects which are expected to occur at or near the Project site. Climate change “is a global problem precisely because there is no correlation between where GHGs are released and where climate change is felt”. 
   
• Distinction of oil from other raw materials: The High Court took the view that combustion emissions cannot be regarded as effects of a project because the product burnt as fuel is not the extracted oil but a new product following the refining process. Lord Leggatt rejected this argument. He distinguished oil from other commodities which have multiple possible uses, such as steel. In the case of oil, there is not “any element of conjecture or speculation” about what will ultimately happen to the commodity, and a reasonable estimate can be made regarding the level of emissions that will be produced when the oil is burnt as fuel using established methodologies. Given the refining process does not alter the basic nature or intended use of the oil, Lord Leggatt held the causal chain between extraction and subsequent combustion remains unbroken.
   
• National policy: While national policy is relevant to any decision as to whether planning permission should be granted for any project, it does not dispense with the requirement to assess the environmental impact of a project or justify limiting the scope of that assessment before such a decision is made. In addition, just as environmentally beneficial indirect effects of a project are clearly a relevant matter for a planning authority to consider, corresponding adverse effects are also a “material planning consideration”.
   

Dissenting judgment (Lord Sales and Lord Richards)

The dissenting judgment was delivered by Lord Sales, who took the view that it would be “constitutionally inappropriate” for a local planning authority to make planning decisions based on its own views regarding downstream emissions, given that these concerns are addressed by central governments at the level of national policy. 

Lord Sales further argued that the general scheme of the Directive made clear that environmental effects are limited to effects on a project’s local area and that the entirety of downstream emissions do not qualify as indirect effects of a project. Lord Sales agreed with the High Court’s approach that, for the purpose of the legislation, the effects of the project do not extend to remote effects, including GHG emissions occurring downstream once combustion occurs.

Comment

The decision in Finch means that planning authorities are now required to assess combustion emissions as part of the EIA before granting approval for a project. More generally, the decision has clarified that the scope of EIAs includes downstream emissions where these can properly be said to be “effects of the project”. Finch draws a distinction between fossil fuels and other commodities, the consequence being that projects not involving fossil fuels (e.g. renewable energy plants) are unlikely to be affected by Finch, unless it can be said with “virtual certainty” that a project will result in certain downstream emissions (as the Supreme Court held the case is with respect to oil).  

The Supreme Court acknowledged that the Regulations do not prevent a competent authority from granting development consent for projects which will cause significant harm to the environment; the Regulations merely aim to ensure that, if such consent is given, “it is given with full knowledge of the environmental cost”. However, the inclusion of downstream emissions in the scope of EIAs, which are accessible to the public, may make it more difficult in practice for a planning authority to grant consent to fossil fuel projects with high levels of downstream emissions. EIAs are accessible to the public and the Supreme Court observed that a “key democratic function” of the EIA process is to ensure that the environmental impact of a project is properly assessed so that informed public debate can take place and be considered in the decision-making process. As a result, the decision in Finch is likely to increase public scrutiny of fossil fuel projects and place planning authorities under greater pressure to restrict the expansion of such projects.