The Finch case and its potential effects: an in-depth analysis

On Tuesday 20 June 2024, the United Kingdom Supreme Court handed down the long-awaited judgment in the Finch case. The question for the court was whether greenhouse gas emissions resulting from the burning of fossil fuel products had to be assessed within the environmental impact assessment for the oil well where the fossil fuels would be extracted. The position before this case was that no assessment of downstream environmental effects (which are classed as “Scope 3” effects) was required. The Supreme Court has now decided that it is required. The delay of almost a year between the final hearing and the hand-down of judgment, and the fact that the decision was reached by a majority of three to two, indicate the difficulty of this issue. In this article, we summarise the decision and its potentially wide consequences in relation to the production of environmental statements. Note, we have not addressed the lengthy dissenting judgment of Lord Sales, which is interesting, but which does not have the precedential value of the majority judgment.

Background

On 27 September 2019, on the application of Horse Hill Developments Limited (“the Applicant”), Surrey County Council granted planning permission to retain and expand the Horse Hill oil well site in Horley (“the Project”). The Project involved drilling four new oil wells to extract crude oil that would later be refined for use as fuel. 

When deciding whether to grant planning permission, the Council was required to make an environmental impact assessment (“EIA”) of the Project under the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (SI 2017/571) (“the Regulations”). These regulations implemented Directive 2011/92/EU of the European Parliament and Council, as amended by Directive 2014/52/EU. In September 2019, the UK was part of the EU and the Regulations fell to be interpreted in light of the directive that they were intended to implement. The legislation as it has been preserved in UK law following the nation’s departure from the EU has not materially changed to this day. 

The Regulations provided that planning permission for a project that fell within the scope of the regulations could not be granted unless an EIA was carried out and that the EIA had to be taken into account when deciding whether to grant planning permission. Regulation 4(2) of the Regulations provides that an EIA “must identify, describe and assess in an appropriate manner, in light of each individual case, the direct and indirect significant effects of the proposed development” on a range of factors including “climate”. This reflected Article 3(1) of the Directive. 

An EIA of the Project was conducted before the Council granted planning permission. Initially, at the scoping stage, the Council considered that the EIA should include an assessment of the greenhouse gases that would be produced by burning the fuel refined from the oil extracted by the Project. In other words, the Council considered that the downstream, or Scope 3, emissions from the Project should be included in the EIA. However, the environmental statement submitted by the Applicant assessed only the greenhouse gas emissions resulting from the development itself (such as the construction of the wells and transport associated with the construction process). It did not assess the greenhouse gas emissions that would result from the burning of the refined hydrocarbon products that would be produced from the oil extracted at the site which had been requested by the Council at scoping stage. In the EIA itself, the Council followed the lead of the environmental statement and did not assess these greenhouse gas emissions. 

Sarah Finch, a local resident, challenged the Council’s decision by judicial review. She argued that the EIA had been legally insufficient because the Council had failed to assess “the direct and indirect significant effects of the proposed development” by failing to assess the so-called downstream effects of the Project. On her case, a legally sufficient EIA had not been undertaken, and the Council had therefore not been entitled to grant planning permission. She applied for the permission to be quashed.

On 21 December 2020, the High Court (Holgate J) dismissed the claim ([2020] EWHC 3566 (Admin); [2021] PTSR 1160). He held that, properly interpreted, the Regulations did not require the assessment of downstream emissions such as those produced by burning oil extracted from the wells. The Council, in Holgate J’s judgment, had been correct to accept the EIA as limited to direct releases of greenhouse gases within the red line of Project site for the lifetime of the Project.

Ms Finch appealed the High Court’s decision to the Court of Appeal, where the same question was considered by three judges. On 17 February 2022, the Court of Appeal [2022] EWCA Civ 187; [2022] PTSR 958 dismissed Ms Finch’s appeal, but on different grounds from those stated in the High Court. The majority in the Court of Appeal (Lewison LJ and Sir Keith Lindblom, the Senior President of Tribunals) decided that it was a matter for the judgement of each local planning authority to decide whether downstream emissions fell within the scope of an EIA in each case, and that in this case the Council had been entitled to decide that the emissions did not need to be assessed. Moylan LJ, dissenting, agreed that it was a matter for the Council’s judgement, but considered that it had not exercised that judgement lawfully in this case. 

Ms Finch appealed to the Supreme Court and the hearing took place on 21 and 22 July 2023. 

On 20 June 2024, by a majority of three Justices to two, the Supreme Court allowed Ms Finch’s appeal and quashed the Council’s decision to grant planning permission ([2024] UKSC 20). Lord Leggatt wrote the majority judgment, with which Lord Kitchin and Lady Rose agreed. Lord Sales wrote the minority judgment, with which Lord Richards agreed. 

The judgment

The majority judgment contains a range of material that is relevant or interesting to environmental and planning law practitioners, developers and planning authorities. However, the most important point is the answer given to the main question in the case. The majority held that the downstream emissions of the development did constitute “effects of” the Project and did therefore fall to be assessed in an EIA before a decision could be made on the application for planning permission. The position of Holgate J in the High Court, who had held that downstream emissions could not constitute effects of a project for these purposes, was rejected. The position of the Court of Appeal, which had held that it was a matter for the local authority’s judgement whether downstream emissions constituted effects of a project, was also rejected. 

Key to the decision is the analysis of causation. Lord Leggatt noted that a number of tests of causation exist in the law (§68), including the but-for test (where the cause is necessary but not always sufficient to bring about the effect) and a stricter test where the cause is both necessary and sufficient to bring about the effect. He went on to say (§80) that, in this case, the strict test of necessary and sufficient conditionality was satisfied, since it was agreed between the parties that it was guaranteed that oil extracted through the development would be burnt as fuel and give rise to downstream greenhouse gas emissions. This causal connection is “much stronger than is required as a test of causation for most legal purposes”. Therefore the downstream emissions did, in the majority’s view, qualify as effects of the Project. 

Lord Leggatt emphasised (§93) that there is no geographical limit, based on national borders or anything else, to what can qualify as the effect of a project for EIA purposes. He also emphasised (§150) that the existence of national policies about fossil fuel use and climate change did not reduce the scope of the EIA required by legislation, nor did it reduce in policy terms the need for detailed relevant information to be before the decision-maker.

Commentary

A number of points arise from the judgment. 

First, it is important to bear in mind that the content of an EIA does not bind the hands of the authority deciding an application for planning permission. This decision is likely to result in EIAs for some proposals, including but not limited to proposals for minerals extraction projects, reflecting a poorer environmental impact than would have been the case previously, because more environmental harm will now need to be captured within the scope of the EIA. However, as long as the EIA is properly taken into account, the planning authority will remain free to decide the application on its merits in accordance with planning law and policy. 

Second, relatedly, the wider scope of EIAs has the potential to change the public debate around proposals for projects that are alleged to have negative downstream environmental consequences. Local authorities will produce more information that can be accessed and used by campaigners against such projects. This could improve the quality of debate about such proposals by giving more precision to arguments about their merits and demerits, but it also has the potential to equip one side of the debate with figures that cannot easily be met by equivalent quantifiable data representing the positive contribution of the development. In the case of a minerals scheme, for example, weighing negative environmental impacts against countervailing factors such as energy independence, energy markets and the local and national economies requires care and nuance. 

Third, the issue of causation will continue to present difficulties. This is for two reasons. First, the majority judgment did not state clearly what test of causation should be applied when deciding whether downstream emissions constitute effects of a project for the purposes of EIA. This is a peculiar omission that will have applicants and objectors arguing over whether the but-for test is appropriate or whether both necessary and sufficient conditionality must be present, or some other test. This likely reflects the difficulty that even three judges encountered in trying to agree a position on this tricky issue. Second, many factual situations will present more complex chains of causality than that presented in this case. When minerals are being extracted that could be used in a number of different ways, the assessment of the emissions “effects” of the extraction project will be challenging. The need for additional careful case-by-case consideration of these effects is likely to introduce additional complexity, and thereby delay and costs, into the planning system.

Fourth, the increase in prominence given to the downstream environmental impacts of fossil fuel projects in the UK will feed into debate about the extent to which fossil fuels and other energy sources should be imported into this country or produced domestically. The economic, geopolitical and other consequences of a decrease in domestic production for environmental reasons without a corresponding decrease in planning domestic consumption are not straightforward. The incoming government would be wise to take a strategic approach to this issue rather than allowing individual local authorities to blaze the trail in an uncoordinated manner. 

Fifth, it is not only negative downstream environmental effects that now have to be captured in the EIA process. If a project would have positive effects that were too remote to fall within the scope of EIA as previously understood, local planning authorities would now be obliged to take them into account. 

Sixth and finally, it should not be assumed that the impact of this judgment is limited to fossil fuel projects. It will be felt in all proposals where the development site is the source of products or processes that, elsewhere and at another time, have environmental effects. For example, the construction of a bicycle factory could be judged to have positive environmental effects resulting from the increase in use of bicycles in favour of motorised forms of transport.