Australian High Court clarifies role of ‘scope 3’ emissions in mining approvals

The court ruled that a failure by the consent authority to consider whether to impose conditions relating to the minimisation of scope 3 greenhouse gas (GHG) emissions associated with the combustion of coal mined in New South Wales (NSW) invalidated approval for the expansion of a coal mine.

In this case, a three to two majority of the court found that development consent granted for the Mount Pleasant Optimisation Project in the Hunter Valley was invalid because the consent authority failed to specifically consider whether conditions should be imposed to minimise scope 3 GHG emissions to the greatest extent practicable as required by the State Environmental Planning Policy (Resources and Energy) 2021 (NSW) (Resources SEPP).

Although the decision is a significant milestone in Australian climate-related litigation, its practical implications are narrow. The judgment relates to the interpretation of a specific provision of NSW planning law rather than creating a broader requirement for decision-makers to refuse developments with significant downstream emissions.

Project approval challenged

The case arose from MACH Energy's proposal to extend the life of the Mount Pleasant mine by 22 years, to 2048, and to increase peak annual production and extract an additional 406 million tonnes of coal.

As part of the environmental assessment process, three categories of GHG emissions were assessed: Scope 1 emissions being direct emissions generated by mining activities; scope 2 emissions being indirect emissions arising from electricity used to operate the mine; and scope 3 emissions being indirect emissions generated when the mined coal is consumed, primarily overseas.

Scope 3 emissions for the project were estimated at approximately 860 million tonnes over its lifetime.

The NSW Independent Planning Commission (IPC), acting as the consent authority under the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act), approved the project and imposed conditions addressing scope 1 and scope 2 emissions. However, it did not impose conditions directed at scope 3 emissions, taking the view that those emissions would be regulated by the jurisdictions in which the coal was consumed.

The approval was challenged by community group Denman Aberdeen Muswellbrook Scone Healthy Environment Group Inc, eventually leading to the High Court appeal.

Court rejects requirement to focus on local climate impacts

The High Court considered two principal issues:

Construction of section 4.15(1)(b)

The first concerned section 4.15(1)(b) of the EPA Act, which requires decisionmakers to consider “the likely impacts of a development, including environmental impacts on both the natural and built environments, and social and economic impacts in the locality.”

The NSW Court of Appeal had previously ruled that the provision required consideration of environmental impacts "in the locality" of the development. All five High Court judges rejected that interpretation and found that the legislation requires consideration of “the likely impacts of a development” without imposing any geographical restriction on where those impacts occur. The phrase "in the locality" was found to apply only to “social and economic impacts” and does not limit the consideration of environmental impacts to the immediate area surrounding the project.

The section therefore required the IPC to identify the likely impacts of the development, and then take those impacts into consideration, without specific consideration of any particular local impacts. When reviewing the IPC’s reasoning, the High Court found the IPC had discharged the obligations imposed under this section, including through its observation that coal mining and combustion are “a major contributor to anthropogenic climate change, which has the potential to impact future generations”.

Application of clause 2.20(1)(c)

The second issue on appeal focused on clause 2.20(1)(c) of the Resources SEPP which  requires consent authorities, before granting approval for mining and certain other resource projects, to consider whether consent should be granted subject to conditions aimed at ensuring GHG emissions are minimised to the greatest extent practicable.

The majority of the court found that the IPC had failed to comply with that obligation in relation to scope 3 emissions. While the IPC had expressly considered and imposed conditions addressing scope 1 and 2 emissions, its statement of reasons did not demonstrate any specific consideration of whether conditions should also be imposed to minimise scope 3 emissions.

The majority held that it was not sufficient for the IPC to note that scope 3 emissions would be regulated through foreign laws, national emissions frameworks, or international arrangements such as the Paris Agreement. Instead, clause 2.20 required the IPC to directly consider whether conditions targeting those emissions should form part of the approval.

In dissent, two judges held that the IPC had sufficiently addressed the issue by referring to clause 2.20, considering the project's scope 3 emissions, and assessing the relevant domestic and international policy framework. In their view, the IPC had effectively concluded that the conditions imposed on scope 1 and 2 emissions were sufficient to minimise the project's overall GHG emissions to the greatest extent practicable.

Practical implications

While the decision has attracted significant attention, its practical effect is narrow.

The ruling establishes that NSW consent authorities assessing mining, petroleum production and extractive industry developments under the Resources SEPP must expressly consider whether conditions should be imposed to minimise GHG emissions, including scope 3 emissions. The decision does not require any particular outcome following that consideration.

However, the majority's reasoning makes clear that decision-makers cannot simply rely on the existence of foreign regulatory regimes or international climate agreements to satisfy that obligation.

The judgment therefore reinforces a broader administrative law principle: where legislation requires a mandatory consideration to be considered, the decision-maker must be able to demonstrate that it has genuinely considered the issue.

Notably, the NSW IPC appears already to have adopted an approach consistent with the High Court's reasoning. Just one week before the MACH decision was handed down, the IPC approved the Hunter Valley Operations North and South Open Cut Coal Continuation projects. Those approvals included conditions requiring the preparation of a scope 3 management plan, aimed at ensuring reasonable and feasible measures are adopted to minimise scope 3 emissions to the greatest extent practicable.

The conditions also require measures to ensure exported coal is supplied only to jurisdictions that are parties to the Paris Agreement, or to maintain emissions reduction policies considered consistent with the agreement's objectives.

While the practical impact of such conditions may be limited, their significance is in demonstrating that the consent authority has expressly addressed the question required by clause 2.20 of the Resources SEPP.

The decision therefore stops well short of creating a new climate-based approval test for mining projects. Instead, it confirms that where NSW planning laws require consideration of scope 3 emissions, decision-makers must be able to show they have directly engaged with the issue. For future resource project approvals, that procedural requirement may prove to be the judgment's most enduring impact.