Oil Projects Must Consider Full Climate Impact, Top U.K. Court Rules

Britain’s highest court has ruled that local councils and planning groups must consider the full environmental impact of new fossil fuel projects when deciding whether to approve them, a decision that could have far-reaching consequences and that climate activists hailed as a major victory against climate change.

In particular, the ruling will make it harder for Britain to move ahead with plans to develop large offshore oil fields in North Sea, including Rosebank, one of the country’s largest undeveloped oil fields. Situated off the coast of Scotland, Rosebank contains an estimated 300 million barrels of recoverable oil.

“This is hugely significant, not just in the U.K. but in the world,” Annalisa Savaresi, a professor in climate change law at the University of Stirling in Scotland, said of the ruling, which Britain’s Supreme Court handed down on Thursday. “It’s not the end of oil, but it’s definitely an important procedural step that has been long overdue.”

Previously, councils and planning groups in Britain were obligated to consider only the planet-warming emissions from their own operations. Now, they will also be required to estimate and disclose the emissions produced by their suppliers or consumers, such as from oil being refined or burned as fuel. Those emissions, produced along what’s known as a company’s “value chain,” make up the bulk of greenhouse gas emissions related to oil production.

The case is among a growing number related to climate change that are being decided by international tribunals, national courts and in U.S. states. In January, a court in Norway ruled that three government-issued permits to develop new oil and gas fields were invalid because the environmental impact had not been sufficiently assessed. And in April, the European Court of Human Rights ruled that Switzerland had failed to meet its targets in reducing carbon emissions and must act to address that shortcoming.

The ruling in Britain, a 3-to-2 decision by the Supreme Court judges, involved a case brought against the Surrey County Council, southwest of London, by an environmental campaigner who argued that a proposal for new oil wells needed to take into account the impact of emissions from the use of oil extracted. Justice George Leggatt, who gave the majority opinion, wrote that it was “inevitable” that oil from the site would be burned and therefore needed to be considered.

Stephen Sanderson, the chief executive of UK Oil and Gas, a part owner of the Surrey project, said on Thursday the decision was “perplexing” but added that the company would work with the local planning authorities to address the change to requirements.

Jorge Viñuales, a professor of law and environmental policy at the University of Cambridge, said the judgment was especially meaningful, even outside the country, because Britain’s Supreme Court is not known for being an activist court.

That dynamic, concurred Nikki Reisch, the director of climate and energy for the Center for International Environmental Law in Washington, “gives that much more weight to the conclusions drawn.”

In the United States, the Securities and Exchange Commission unveiled a watered-down proposal in March that did not require companies to disclose the emissions produced by their suppliers or consumers. Corporations had argued that disclosing full climate impact of their projects would be too complicated and expensive. But Ms. Reisch said that Thursday’s ruling added weight to arguments that U.S. agencies should consider the full life cycle of greenhouse gas emissions as well.

Climate disasters, exacerbated by the use of fossil fuels, are increasingly taking a toll around the world, with people facing severe heat, floods and fire.

In the past two months alone, dozens of cities in Mexico have broken heat records, killing more than 100 people. Greece is bracing for wildfires, and India has experienced temperatures as high as 126 degrees Fahrenheit. In the United States, almost 100 million people are facing scorching temperatures that excepted to continue through the weekend.

The International Energy Agency, the world’s leading energy agency, said in 2021 that oil and gas exploration projects needed to be stopped to keep global warming in check by 2050, but oil companies and countries around the world have continued to pursue them.

In Britain, Prime Minister Rishi Sunak has encouraged more oil and gas licenses in the North Sea and has scaled back his Conservative Party’s climate pledges in the run up to a general election that is scheduled for July 4.

The opposition Labour Party, which is expected to secure the most parliamentary seats that vote, has also pared back its ambitious climate policy and has vowed not to revoke existing licenses for oil and gas projects.

The British government last year gave the go-ahead to develop Rosebank, which would provide a boost to Britain’s oil and gas industry and was expected to generate 8.1 billion pounds, or about $10.2 billion, in direct investment and support around 1,600 jobs in the construction phase. Climate activists have lodged legal challenges to government plans, saying that developing Rosebank violates Britain’s climate pledges.

Courts that are reviewing high-profile cases like Rosebank “will now have to take this into account, which is a big change for them,” said Thomas Hale, a professor focusing on environmental issues at the University of Oxford’s Blavatnik School of Government.

Dr. Hale added that as more courts and governments in Europe declare that comprehensive emissions must be considered, the narrower approach taken by oil companies, in which their calculations exclude emissions from the products they sell, looks less viable.

“For investors, that’s a big concern,” Dr. Hale said. “If you’re thinking about the regulatory pressure a company might face, this is another kind of like warning that the approach they’re taking is not going to be sustainable legally.”