Environmental Law News Update

“The absence of a suitable test or target for the reduction of Scope 3 emissions”: High Court challenge fails, and the Government Calls for Evidence”

“Difficult and complex…”, “the most significant and most challenging…”. So says a Government paper of last week introducing the landscape of Scope 3 greenhouse gas emissions reporting.

Under the different Scopes of Greenhouse Gas emissions reporting, Scope 3 can count for the largest volume of emissions, and by some way. With Scope 1 covering direct emissions, and Scope 2 covering indirect emissions from the generation of purchased energy, Scope 3 covers all other indirect emissions. These are the emissions not included in Scope 2 and which occur in the value chain of the reporting company. Scope 3 can so be “between 80-95% of the total value chain of an organisation’s footprint”[1].

The ability to be contentious is borne out in recent litigation. Judgment was handed down on 19 October 2023 in R. (on the application of Greenpeace Ltd) v Secretary of State for Energy Security and Net Zero [2023] EWHC 2608 (Admin). The claimants brought claims for judicial review of the licensing for further offshore oil and gas exploration and production. Scope 3 emissions were ‘central’ to this case. As Holgate J said in paragraph 1 of his judgment: “A central issue is whether the Secretary of State acted unlawfully by not including in his assessment of the Plan downstream emissions of greenhouse gases (“GHGs”) from the end use by consumers of oil and gas as a fuel. These are also referred to as “scope 3” emissions.”

The background to the case involved the reasoning for offering licensing for oil and gas. In so assessing, the Government determined upon a Checkpoint[2], “to ensure that the compatibility of future licensing with the UK’s climate objectives is always evaluated before a licensing round is offered.” The idea was that the Checkpoint would include a number of tests to check this compatibility. A Scope 3 test was proposed, but not taken up, with the consultation notes arguing that: “The methodology for accounting for emissions in this manner is potentially highly challenging”. The Government further took the position “that the UK oil and gas sector is not responsible for end use emissions produced by consumers (whether domestic or international) using its products” (at [42] of judgment).

The exclusion of the Scope 3 test was part of the JR challenge. The Court held (at [142]), that the Checkpoint was “an informative, non-binding document to assist Ministers”, it did not have statutory footing. The Court also pointed out (at [145]) that: “A key part of the Secretary of State’s reasoning was the absence of a suitable test or target for the reduction of scope 3 emissions which could be used”… Accordingly, the challenge on this ground failed, because (at [149]), “It was a matter of judgment for the Secretary of State as to whether he considered there to be an appropriate test or benchmark for taking scope 3 emissions into account”, and there not being one, there was no basis for the argument that failing to include such a test was irrational or erroneous in law.

The Government have been proactive in trying to solve this challenge. On the same day this judgment was handed down, the UK Government launched an open Call for Evidence on “the benefits, costs, and practicalities” of Scope 3 greenhouse gas emissions reporting. The reporting of Scope 3 emissions remains largely voluntary. Establishing a framework for reporting would enable the UK to meet the International Sustainability Standards Board inaugural standards for sustainability-related disclosures. However, the question mark over Scope 3 is in the ‘how’ because it covers such a vast array of emissions. The UK Government’s Call for Evidence seeks views on responding to the challenges. Read more about the Call for Evidence here.

We note for readers that the Greenpeace oil and gas licensing case follows on the earlier Scope 3 case of 2023, R. (on the application of Friends of the Earth Ltd) v Secretary of State for International Trade/UK Export Finance (UKEF) [2023] EWCA Civ 14. In this case, Friends of the Earth challenged the financing of a gas project in Mozambique because the Climate Change Report (‘CCR’) informing the decision was done without adequately quantifying GHG emissions. The Court of Appeal dismissed Friends of the Earth’s appeal, holding at [63], “We conclude that UKEF’s decisions as to the quantification of the Scope 3 emissions and the adequacy of the CCR were well within the substantial margin of appreciation allowed to the decision-makers.” The Courts are also considering Scope 3 emissions in R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council [2022] EWCA Civ 187. The appeal in this case was heard in the Supreme Court in July 2023 and we await judgment.

‘Ban on building’ – nutrient neutrality impasse continues’

The Home Builders Federation (‘HBF’) have called the position a ‘ban on building’[3]. HBF estimate 150,000 homes have been blocked from being built since June 2019 because of rules about nutrient neutrality, and argue that water utilities failure to treat wastewater and agricultural runoff are the primary causes of nutrient pollution, not ‘small amounts of nutrients’ from new homes.

As Natural England explain, the issue can be determinative in planning terms: “LPAs…  must comply with environmental regulations that apply to our nationally protected rivers and coasts… LPAs can permit new homes to be built without adding nutrient pollution to the worst affected rivers.[4]” Their Advice to LPAs[5] whose areas included a relevant river catchment explains that new building developments must ensure that the nutrients that enter the water course must be offset by mitigation measures elsewhere in the catchment to reduce inputs such as phosphates and nitrates.

The Prime Minister proposed to scrap the rules. Amendments were sought to the Levelling-Up and Regeneration bill, with the focus on delivering mitigation measures. It was defeated on September 13 by a vote in the House of Lords. The amendments have not been added to the Bill. It remains to be seen what will happen next, and for now, nutrient neutrality rules remain in force. The Government could introduce the measure in the King’s Speech.

The issue has come recently before the High Court. In C G Fry & Son Limited v Secretary of State for Levelling Up Housing and Communities v Somerset Council [2023] EWHC 1622 (Admin), the LPA refused to discharge certain conditions attached to the planning permission which had earlier been granted to the claimant developer. That was because there had not been an appropriate assessment under the Conservation of Habitats and Species Regulations 2017, to determine the effect of additional nutrients on the Somerset Levels and Moors Ramsar site. The Claimant’s application in the High Court was refused, although permission has been granted to leapfrog the Court of Appeal and go directly to the Supreme Court.

[1] Cited in the Call for Evidence on page 3, referencing https://newclimate.org/resources/publications/corporate-climate-responsibility-monitor-2022

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1105667/climate-change-checkpoint-design.pdf

[3] https://www.hbf.co.uk/nutrient-neutrality-4-years-on/

[4] https://naturalengland.blog.gov.uk/2022/11/25/new-scheme-to-protect-our-waterways-from-pollution-and-enable-home-building-set-to-launch/

[5] https://publications.naturalengland.org.uk/publication/4792131352002560