Climate change and project approvals

Climate Change Energy Environment & Planning Property & Development

Understand where climate change may increase the cost and complexity of approvals

Climate change impacts have for many years been accepted as a relevant consideration in the assessment of planning and environmental applications in Australia. Until recently, the focus of consent authorities has been primarily on the direct greenhouse gas (GHG) emissions of a project from owned and controlled sources (scope 1 emissions), with varying levels of scrutiny given to scope 2 emissions (emissions from purchased energy).

However, there is a growing trend for consent authorities to also require an assessment of scope 3 GHG emissions, being all indirect emissions of a company that occur in the company's value chain, such as emissions generated by the burning of Australian coal overseas. Consent authorities are also increasingly requiring proponents to demonstrate that measures have been taken to reduce, mitigate or even offset these emissions.

Inconsistent approaches to scope 3 emissions between states and territories

The Queensland courts have consistently held that scope 3 emissions are not a relevant consideration when assessing applications for environmental authorities for new mines, although scope 3 emissions have been considered relevant when determining whether the public right and interest will be prejudiced in the grant of a mining lease.

In contrast, a landmark decision of the NSW Land and Environment Court in February 2019 in relation to the proposed Rocky Hill coal mine held that a consent authority must consider scope 3 emissions, and cited climate change impacts as one of many reasons for refusing consent for the mine. The judge also noted the proponent's failure to commit to taking any specific actions to mitigate and offset the climate change impacts of the development.

Subsequent decisions of the NSW Independent Planning Commission (IPC) in the coal mining context have placed significant weight on scope 3 GHG emissions. The IPC has also set an almost impossibly high evidentiary burden for relying on the 'market substitution' and 'carbon leakage' principles, which have long been accepted by the Queensland courts (ie that coal that would have been produced by a proposed mine in Australia will be 'replaced' by a new mine in another country, with a net result that the same amount of coal is burned but the economic benefits transfer from Australia to the other country).

A recent Western Australian Government policy requires proponents of major projects to develop a GHG Management Plan to demonstrate how the project will address its scope 1 emissions in the context of the State's aspiration of net zero emissions by 2050. The Western Australian Environmental Protection Authority has also released a GHG Guideline, pursuant to which it may request credible estimates of scope 1, 2 and 3 emissions over the life of a proposed development.

Environmental groups are increasingly pursuing novel avenues to challenge coal mining and other emissions intensive projects on the basis of climate change. In May 2020, a group of young activists commenced proceedings in Queensland seeking to prevent a new coal mine in the Galilee Basin on the basis that the project will violate their human rights. This is the first time in Australia that a mine has been challenged on human rights grounds, although similar actions have previously been brought overseas.

Federal environmental assessments

The Federal Department of Agriculture, Water and the Environment has recently provided guidance on when GHG emissions, including scope 3 emissions, will be relevant to an assessment under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act).

The Department has indicated that it may request information in relation to GHG emissions (scope 1, 2 or 3) where those emissions may have a direct or indirect impact on a protected matter under the EPBC Act, but that this will be determined on a ‘case by case basis’ depending on the specific circumstances of the proposed action, including its context, scale, magnitude and nature. The Department stated that there is not a trigger point in terms of the scale of the emissions and that the relevant legislative test under the EPBC Act is whether an impact is significant.

As at the date of this guide, the EPBC Act is under review. Submissions to that review, including from the Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development and a number of environmental groups, have called for GHG emissions be added as a trigger for the assessment of a project under the EPBC Act. The inclusion of a climate change trigger that would require EPBC Act approval for any 'emissions-intensive activities' has also been proposed in a private member's bill introduced into the Australian Parliament in February 2020.

Key risks and opportunities

It is unclear if the principles emerging from the Rocky Hill decision and subsequent NSW IPC decisions will be applied in other Australian jurisdictions, and to projects beyond the mining sector.

It is clear, however, that proponents of all major projects will at least need to provide an assessment of the scope 1 and 2 GHG emissions of their projects, and demonstrate measures to reduce, mitigate and in some cases, offset those emissions. A failure to do so could potentially result in refusal.

At least in NSW and WA, the scope 3 emissions of a project (where relevant) should also be quantified and the overall contribution of the project to the 'global carbon budget' should be assessed. Proponents in other states should also expect greater scrutiny of scope 3 emissions in future, both from green groups / community objectors and consent authorities.

Proponents can expect to incur greater costs in preparing their applications due to the additional assessment information that will need to be included regarding GHG emissions. It is also likely there will be significant additional costs to introduce measures to reduce, mitigate or offset emissions. In most cases, it will not be feasible to fully offset scope 3 emissions, which will be far greater than scope 1 and 2 emissions and are largely outside the control of proponents, often being generated by end-customers overseas.

There is an emerging risk that unique and unprecedented conditions of approval could be imposed to deal with climate change impacts. For example, the expansion of the United Wambo Coal Mine in NSW was approved subject to a condition limiting the export of coal only to countries that are signatories to the Paris Agreement or countries with emission reduction policies commensurate to those of Paris Agreement parties. This creates uncertainty for new projects, particularly in light of legislative proposals in NSW to prohibit the imposition of conditions seeking to regulate impacts occurring overseas.

There are, however, opportunities for proponents who can provide a robust assessment of the climate impacts of a proposed project upfront and come up with new and innovative mitigation and offset strategies. There also appears to be an emerging trend in the NSW mining context that approvals for expansion and continuation projects are easier to procure than approvals for greenfield projects.

Key questions

Before an application for consent is lodged for a project with material Scope 1, 2 or 3 emissions, and preferably early in the planning phase for any new development, your organisation should consider:

  • What information and assessment of GHG emissions is currently required in the state or territory in which the application is being made?
  • Have the scope 1, 2 and 3 emissions of the proposal been adequately assessed and quantified? (Consideration of scope 3 emissions may be justified even if not currently required in the relevant state or territory at the commencement of the approvals process, given the rapid rate of change in this area and the long timeframes for environmental impact assessment and approval.)
  • What measures are being proposed to reduce, mitigate or offset the GHG emissions of the development, and does the application clearly outline your organisation's commitment to implement these measures?
  • Are there synergies between the proposed development and existing operations and infrastructure which create efficiencies and justify the development despite its climate change impacts?
  • Where is the customer base for your end product and are those countries (if overseas) signatories to the Paris Convention? If so, could your organisation offer to accept a condition of approval limiting the export of your product only to signatory countries?
  • Will your organisation be seeking to rely on a market substitution or carbon leakage argument and, if so, has sufficient evidence of market substitution and carbon leakage been put forward in the planning application?

Climate change guide

This insight is part of our climate change guide for legal and compliance teams in Australia