Supreme Court clarifies the law on 'downstream' emissions and Environmental Impact Assessments

A year on from hearing a ground-breaking challenge concerning the duty on planning authorities to consider 'downstream' emissions when deciding planning applications, the Supreme Court handed down its judgment in R(Finch) v Surrey County Council and ors [2024] UKSC 20 on Thursday morning (20 June 2024).

 

By a three-to-two majority, the Supreme Court allowed the appeal of a local resident (Sarah Finch on behalf of the Weald Action Group) and concluded that Surrey County Council’s decision to grant planning permission for a project to expand oil production from the Horse Hill well site near Horley was unlawful because it failed to assess the effect of combustion of the oil produced from the proposed well site, and in particular, the inevitable greenhouse gas (GHG) emissions that will arise as a result (the 'downstream' emissions). A press summary of the judgment can be found here.

This long-awaited judgment is likely to have wide-reaching ramifications – this case was seen by many environmental activists and lawyers as one that could open the door to challenging the grant of planning permission to other oil and gas projects where the full downstream climate impact had not been considered. Indeed, legal challenges to other projects had been stayed pending this decision. These cases will now be considered and decided in a new legal landscape.

There are also interesting questions about the impact of the judgment on other high-carbon projects which have been in the crosshairs of environmental campaigners and litigators.

the background

Horse Hill Developments Limited sought planning permission from Surrey County Council (the local planning authority) to retain and expand an existing onshore oil well site comprising two wells, and to drill for four additional wells. The Environmental Statement ('ES') prepared for the project considered 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.' i.e. the impact of the production process and the work on the site itself. It did not consider the impact of the greenhouse gas emissions that would result when the oil extracted at the site was refined and later used as fuel elsewhere i.e. the downstream or 'Scope 3' emissions (This term is derived from the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (the 'GHG Protocol').

Surrey County Council accepted this approach, and the project was given permission to proceed in 2019. Ms Finch challenged Surrey County Council’s decision. Effectively, her argument was that future use of the products extracted and refined at the Horse Hill site should be considered when the impact of the project was being considered. The challenge was unsuccessful before Holgate J in the High Court on the basis that such downstream emissions could not – as a matter of law – be an effect of the development for the purposes of the Environmental Impact Assessment (the 'EIA').

The Court of Appeal (by majority) also upheld the grant of planning permission although it was with some hesitation given the terse (albeit legally adequate) reasons given by Surrey County Council. However, the Court of Appeal disagreed with Holgate J’s reasoning. They concluded that it was wrong to say that downstream impacts were legally incapable of being an environmental effect requiring assessment – but that it was ultimately a matter of fact in each individual planning application and for the judgment of the planning authority. What was relevant was the degree of connection between the development and its effects.

 

legal issues

The core issue in the case was the interpretation of the Directive 2011/92 EU of the European Parliament (the 'EIA Directive') and of the Council and the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the 'EIA Regulations').

The EIA Regulations identify projects that should be subject to an impact assessment in light of their likely significant effects on the environment, with the ultimate objective being to help local planning authorities have full knowledge of the effects of a project when making planning decisions. This assessment is based primarily on an ES prepared by the developer.

The Regulations require any such ES to 'identify, describe and assess in an appropriate manner, in light of each individual case, the direct and indirect significant effects' of the proposed development (regulation 4(2)). Paragraph 5 of Schedule 4 specifies that any description of likely effects should include 'the direct effects and any indirect, secondary, cumulative, transboundary, short term, medium term and long term, permanent and temporary, positive and negative effects of the development'.

The local planning authority cannot lawfully grant planning permission for the project unless the EIA process complied with the obligation in regulation 4(2).

The question that follows is whether downstream emissions fall within the scope of the term 'direct and indirect significant effects' such that they must be described in an ES and therefore assessed as part of the EIA.

 

the majority judgement

The judgment of Lord Leggatt (with whom Lord Kitchin and Lady Rose agree) on behalf of the majority makes a number of key findings:

• The introduction to the judgment first dispels the notion – citing the United Nations Environment Programme – that leaving oil in the ground in one place will lead to a corresponding increase in production elsewhere (paragraph 2);
• When considering the likely effects of the project, Lord Leggatt’s starting observation is that it is inevitable that the oil produced at the Horse Hill site would be refined and eventually undergo combustion, which in turn would produce GHG emissions (paragraph 7);
• Lord Leggatt finds that 'the extraction of the oil is not just a necessary condition of burning it as fuel; it is also sufficient to bring about that result because it is agreed that extracting the oil from the ground guarantees that it will be refined and burnt as fuel…' (paragraph 80). There was therefore a clear causal chain ('the strongest possible' link going beyond the usual ‘but for’ test for causation) between the project and the release of GHGs into the atmosphere;
• The EIA Directive does not impose any geographical limits on the effects of a project. There is 'no principle that, if environmental harm is exported, it may be ignored' (paragraph 93);
• The judgment finds that the ‘case-by-case’ evaluative judgment that the Court of Appeal proposed would lead to inconsistent answers from different planning authorities. This would not be a reasonable way to interpret the EIA Directive;
• The judgment also dismisses the suggestion that current national planning policy (which, broadly speaking, encourages the domestic production of oil and gas) is relevant when it comes to considering the scope of EIAs. In Lord Leggatt’s view, the purpose of an EIA is different – it is to ensure that decisions are taken with full knowledge and public awareness of the environmental consequences. The importance of public participation and awareness crops up as a theme at various points in the judgment, and the observation in paragraph 21 (when discussing the objects of the EIA Directive) that 'You can only care about what you know about' neatly summarises the rationale behind the Directive’s public participation requirements; and
• Lord Leggatt does add an important caveat. In his view, the obligation under the EIA Directive to consider effects is not open-ended – the process only needs to assess effects which evidence shows are likely to occur and which are capable of meaningful assessment (paragraph 167).

In summary, Lord Leggatt concludes that Surrey County Council’s failure to assess the effect of the combustion of the oil that would be produced from the proposed well site meant that its decision to grant planning permission for the project was unlawful.

 

lord sales' dissent

Lord Sales’ dissent (which Lord Richards agrees with) is as essential a read as the majority judgment. For starters, it also shares the majority judgment’s scepticism about the ‘case-by-case’ evaluation proposed by the Court of Appeal. However, the conclusions in the dissent are otherwise diametrically opposite to that reached by Lord Leggatt:

• The dissent considers that downstream GHG emissions are issues to be addressed by central governments at a level of national policy. These are 'all "big picture" issues' which a local planning authority is not in a position to address. (paragraph 255)
• Lord Sales’ framing of the purpose of the EIA process is that is 'intended to furnish information to enable the planning authority to exercise its judgment about such matters, not to create some general databank about possible downstream or scope 3 effects which could not bear on what the planning authority has to do.' (paragraph 257)
• The general scheme of the EIA Directive indicates that downstream emissions do not qualify as indirect effects within the meaning of the Directive. Otherwise, there was a risk of emissions having to be assessed twice – once in the context of the EIA for the Horse Hill site and again in the context of any EIA prepared for a refinery that may need to be constructed to process the oil. This, in Lord Sales’ view, would be disproportionate. (paragraph 261)
• The dissent also highlights the risk of incoherence emerging if different planning authorities and different member states start reaching different conclusions on what the downstream emissions arising from projects are. (paragraph 262)
• There is also interesting analysis in the dissent on what the words 'indirect effects of the project' mean – Lord Sales concludes that that this means the effects in question must be relatively closely connected with the project and not remote. On a natural reading, downstream GHG emissions could not be said to be ‘of the project’. The EIA Directive could have used a wider formulation, but does not. Lord Sales found no materials of the European Commission or any jurisprudence of the CJEU which points towards the inclusion of downstream emissions in EIAs.
• Finally, drawing on comments previously made by Lord Bingham about the European Convention on Human Rights, Lord Sales expresses caution about using the EIA Directive as providing a remedy for every problem in every situation. Instead, he suggested, it should be interpreted according to its terms and its intended scheme (paragraph 332).

Overall, Lord Sales aligns himself closely with Holgate J’s decision in the High Court, and to some extent with Sir Keith Lindblom in the Court of Appeal. It is perhaps interesting to note that both are among the country’s most experienced planning judges.

 

the impact of the judgement

This outcome must have looked a long way away for the Appellant when the case was initially refused permission in the High Court on the papers and then at an oral renewal hearing, before being given the green light by the Court of Appeal – only to be rejected on the substance by both the High Court and Court of Appeal.

Throughout this time, however, the proceedings were keenly followed by local planning authorities, the fossil fuel industry, central government, and by environmental activists and campaigners. The possibly far-reaching impact of the claim was evident from the range of organisations who intervened in the proceedings – Friends of the Earth, Greenpeace, the Office for Environmental Protection ('OEP') and West Cumbria Mining Limited were all granted permission to make submissions.

The OEP’s intervention was particularly notable as it was their first intervention in the Supreme Court. They adopted a neutral stance on the facts, but highlighted the need for clarity on the law on assessing indirect effects of developments (and on downstream GHG emissions in particular). The Supreme Court found their submissions to be 'particularly helpful' (paragraph 50).

The immediate impact on the Horse Hill project is unclear. Investors in the project have reportedly described the decision as 'perplexing', and it is likely that the operator will amend the EIA or make retrospective planning submissions.

More widely however, it will have a direct impact on the legal submissions in ongoing challenges to planning permissions granted for other projects – such as the challenges to the Whitehaven project in Cumbria, and the Rosebank project in the North Sea. Our understanding is that those challenges contain similar downstream emissions arguments.

Looking further afield, the judgment may have implications beyond fossil fuel projects – this challenge was seen by many as a ‘gateway’ challenge. A number of industries – planning applications for airports being the obvious example – may be impacted. That said, it is notable that large parts of the majority judgment focus on the ‘inevitability’ that combustion will follow if oil is produced. This is a feature that could be said to be fairly unique to the fossil fuel industry – Lord Leggatt in paragraphs 121 and 122 distinguishes it from other industries such as iron and steel or the manufacturing of components for vehicles.

The success of challenges to planning permission in other high-carbon industries may well depend on two factors. First, whether claimants can draw a similar chain of ‘inevitability’ (the extent of causation will loom as the defining talking point) and second, how far judges – especially new appointments who may have first-hand experience of climate litigation – will be willing to push the envelope in future cases. More experienced planners will also have views on how this is all likely to play out at a local authority decision-making level when they grapple with information contained in EIAs.

In a year that has already seen the ECtHR break new ground and the High Court declare the Government’s latest plans to deliver Net Zero by 2050 unlawful for failing to properly explain the delivery risks, the Supreme Court’s decision reinforces the sense that more will be expected when it comes to the decision-making of governments and local authorities in the face of the climate crisis.

further information

If you have any questions or concerns about the topics raised in this blog, please contact Sahil Kher.

 

about the author

Sahil is a senior associate in the public law team. His practice covers all aspects of public law from judicial reviews to public inquiries, with particular expertise in environmental and climate change judicial reviews, planning challenges, human rights-based challenges, and public procurement litigation.