No more Scope 3 greenhouse gas emissions in environmental impact assessments?

By Stefano D’Ambrosio from Irwin Mitchell's Planning and Environment team

In R (on the application of Sarah Finch on behalf of the Weald Action Group) v Surrey County Council and others [2022] EWCA Civ 187, the Court of Appeal held by majority that the Surrey County Council's decision to grant planning permission for the extraction of crude oil at the Horse Hill Well Site was lawful.

The core of the discussion in this case was if the Council was required or not to assess the indirect environmental impacts caused by the downstream greenhouse gas (GHG) emissions of the proposed development (emissions of the future combustion of oil).

Case facts and High Court’s ruling

On 27 September 2019, the Council granted planning permission Ref. RE18/02667/CON for the retention and extension of the existing well site (comprising two wells) and to allow the drilling of our new hydrocarbon wells.

The environmental statement of the development of four new hydrocarbon wells only assessed the direct impacts of the greenhouse gas emissions of the development itself for production of oil and concluded that these impacts would be of negligible significance. The indirect impacts caused by the downstream GHG emissions from the use of its end product (combustion of oil) were not assessed.

The claimant, Sarah Finch (and the Weald Action Group she represented), argued that the Council had failed its legal duty to consider the indirect environmental impacts from the downstream GHG emissions.

On 15 July 2020, the case was granted permission to proceed and, on 21 December 2020, the High Court’s judgment (available here) was handed down, dismissing the claim. Mr Justice Holgate considered that the issues raised had ramifications that would also apply for the winning of all minerals for subsequent use in the generation of energy.

Holgate J ruled that: “In my judgment, the fact that the environmental effects of consuming an end product will flow 'inevitably' from the use of a raw material in making that product does not provide a legal test for deciding whether they can properly be treated as effects 'of the development' on the site where the raw material will be produced for the purposes of exercising planning or land use control over that development. […] Instead, the true legal test is whether an effect on the environment is an effect of the development for which planning permission is sought. […]”. He added that “there is no requirement to assess matters which are not environmental effects of the development or project.”

He concluded that “the essential character of the proposed development is the extraction and production of crude oil, and not the subsequent process of refining the crude oil at separate locations remote from Horse Hill, followed by the use of infrastructure and/or transport for the distribution of the end products, whether in the UK or elsewhere in the world.”

Court of Appeal’s ruling

The Court of Appeal’s judgement (available here) upheld the Council's decision to exclude downstream GHG emissions from the Development’s Environmental Impact Assessment , but disagreed in the following important considerations in Holgate J’s ruling:

• All three Lord Justices considered that the "true legal test" proposed by Holgate J was not a legal test, and that the real question is the degree of connection between the development and its putative effects.
• The Lord Justices considered that it was incorrect to say that the downstream GHG emissions were not "legally incapable" of being indirect effects of the project. Downstream GHG emissions could be indirect environmental effects, but this is a question of fact and degree, which needs to be determined by the planning authority in each specific case based on the degree of connection.

While the Lord Justices agreed that there are scenarios in which the downstream impacts could be considered as indirect environmental effects of a development, they declined to define what an indirect environmental effect is or to even give examples of it. Sir Keith Lindblom, Senior President of Tribunals in paragraph 67 or the ruling considered that “One can imagine possible scenarios. But I do not think it would be helpful for us to set about inventing examples on hypothetical facts unrelated to the case before us.”

The dissenting judgement by Lord Justice Moylan considered that the Council’s decision was unlawful. Moylan LJ disagreed with the other Lord Justices in what was the scope of the Development. According to him, the focus of the Development was not construction works as provided by the Lord Justices, but the extraction of oil for commercial purposes. Moylan LJ did not go as far as concluding that, as a matter of law, GHG emissions are necessarily required to be assessed in an EIA. However, he considered that “cogent reasons would be required to exclude from assessment, the inevitable effects (the greenhouse gas emissions) of the downstream use of the oil”, and in his opinion the Council’s reasons were legally flawed.

So, should an EIA assess Scope 3 emissions or not?

The Court of Appeal’s ruling does not completely exclude Scope 3 emissions from the scope of EIAs, but, in our opinion, it makes them unlikely to be considered in an EIA.

What are scope 1, 2 and 3 emissions?

• Scope 1 emissions are direct emissions from owned or controlled sources.
• Scope 2 emissions are indirect emissions from the generation of purchased energy.
• Scope 3 emissions are indirect emissions resulting from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. Basically, includes all other indirect emissions not included in Scope 2 that occur in the value chain of a company both upstream and downstream. Upstream Scope 3 emissions are generated by the purchased foods and services, business travel, employee commuting, the contractors of the company, among others. Downstream Scope 3 emissions are generated by the use of a company’s end product, transportation of the end product, leased assets, investments, franchises, among others.

Scope 1 emissions are direct emissions, so they escape the limits of this case.

Scope 2 emissions are indirect emissions, but if the condition for assessing the GHG emissions is the degree of connection between the development and its putative effects, then it is highly likely that these emissions will need to be assessed. The energy purchased is used by an organization and, in most scenarios, an organization has the opportunity to choose its energy provider.

Scope 3 emissions are, as per its definition, emissions not controlled by organizations. The lack of control over these emissions and the uncertainty of who will purchase the end product and how they will use it (among many other variables) could make scope 3 emissions lack a sufficient degree of connection. We will need to patiently wait for the future case law to determine in which specific scenarios the degree of connection is considered sufficient to include Scope 3 emissions as part of an EIA. However, this exercise could have been much simpler if the Court of Appeal had taken the opportunity to define indirect environmental effects in this case