High Court of Australia delivers its first decision on regulating Scope 3 emissions

Case Background

In December 2022, the Denman Aberdeen Muswellbrook Scone Healthy Environment Group Incorporated (DAMSHEG) commenced judicial review proceedings in the NSW Land and Environment Court (LEC) challenging the IPC’s decision to grant development consent to the Mount Pleasant Optimisation Project (the Project) — the expansion of MACH Energy's Mount Pleasant Coal Mine in the Upper Hunter Valley of NSW.  The Project proposed to extend the mine’s life by 22 years (to 22 December 2048), enabling the extraction of an additional 406 million tonnes of coal by deepening part of the existing open cut mining area and doubling the annual production rate from 10.5 to 21 million tonnes per year.

DAMSHEG's challenge was dismissed in the LEC but later upheld by the NSW Court of Appeal, which found the IPC's development consent invalid.  The Court of Appeal held that the IPC failed to take into account a mandatory consideration under s 4.15(1)(b) of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) — specifically, that the IPC had not considered the local environmental impacts in the locality arising from the Project’s contribution to global GHG emissions, including Scope 3 emissions.

MACH Energy obtained special leave to appeal the NSW Court of Appeal's decision to the High Court, with that decision being handed down on 7 October 2026. 

High Court Decision

The High Court appeal turned principally on:

• Section 4.15(1)(b) of the EP&A Act, which requires a consent authority, in determining a development application, to take into consideration "the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impacts in the locality"; and

• Section 2.20(1)(c) of the State Environmental Planning Policy (Resources and Energy) 2021 (NSW) which requires the consent authority to consider whether or not the consent should be issued subject to conditions aimed at ensuring the development is undertaken in an environmentally responsible manner, including conditions to ensure that GHG emissions are minimised to the "greatest extent practicable".

The High Court appeal focused on the impacts of Scope 3 GHG emissions of the Project and the IPC's consideration of the issue within the statutory regime.

The construction of s 4.15(1)(b) of the EP&A Act

All five judges agreed, and accepted MACH Energy's submission, that the NSW Court of Appeal misconstrued s 4.15(1)(b) of the EP&A Act as imposing a requirement to consider environmental impacts of a development "in the locality", when s 4.15(1)(b) requires consideration of the "likely impacts of [the] development". 

In summary, their Honours unanimously concluded that the Court of Appeal incorrectly treated the words "in the locality", that appear at the end of s 4.15(1)(b), as applying to the whole paragraph — incorrectly characterising the mandatory requirement as an obligation to take into consideration the likely impacts of that development in the locality.  Instead, the High Court found that section 4.15(1)(b) requires a consent authority to:

• First, identify what are the "likely impacts" of the particular development; and

• Second, take all those likely impacts into consideration (their Honours also note that, given there is no statutory indication of the weight to be given to the various matters, it is generally up to the decision-maker to determine the appropriate weight, subject to an implied requirement of reasonableness).

It follows that the phrase "likely impact of [the] development" in s 4.15(1)(b) contains no geographic limit.

Did the IPC contravene s 2.20(1)(c) of the Resources SEPP?

By reason of s 4.15 of the EP&A Act, in granting the development consent, the IPC was required to take into consideration the Resources SEPP and, therefore, whether development consent should be granted subject to conditions aimed at ensuring that Scope 3 GHG emissions of the development are minimised to the "greatest extent practicable".

In separate judgments, Gordon, Edelman and Beech-Jones JJ all concluded that the IPC failed to consider whether to impose conditions to minimise, to the greatest extent practicable, Scope 3 GHG emissions (which made up 98% of the Project's emissions).  In a dissenting judgment, Gageler CJ and Jagot J held that the IPC did.

Majority decision

Gordon J noted that the requirement that the IPC consider imposing conditions to ensure that GHG emissions are minimised recognises that the imposition of such conditions will not always be possible or desirable.  In making this statement, Gordon J notes the decision in Mullaley Gas and Pipeline Accord Inc v Santos NSW (Eastern) Pty Ltd in which the IPC approved an application for development consent for a new coal seam gas field but decided not to impose conditions to minimise Scope 3 emissions on the basis that "the Commission's view is that these emissions are outside the direct control of the Applicant and therefore not able to be reasonably conditioned".

However, Gordon J noted that:

The obligation to "consider" issuing the consent subject to conditions aimed at ensuring that greenhouse gas emissions are minimised to the greatest extent practicable is an obligation to engage in "'an active intellectual process' directed at the information".

Gordon J found that the IPC's consideration of the Project's Scope 3 emissions went no further than asking whether they were "appropriately regulated and accounted for" under broader national policies and international agreements such as the Paris Agreement.  Her Honour noted that emission "scopes" are an accounting concept, there is no reference to emissions "scopes" in the UNFCCC, the Paris Agreement or any other international law and the impact of GHG emissions is the same however they are categorised. 

Her Honour found that the fact that Scope 3 emissions may be counted in another country's inventory was relevant to the IPC's duty under s 2.20(2) of the Resources SEPP to consider the GHG assessment in light of applicable policies.  It did not, however, discharge the separate and distinct duty under s 2.20(1)(c) to consider imposing conditions to minimise all GHG emissions, including Scope 3, to the greatest extent practicable.  In practice, consent authorities cannot rely on Scope 3 emissions being "accounted for" overseas.  The authority must actively consider whether conditions could minimise those emissions.

Gordon, Edelman and Beech-Jones JJ all found that while the IPC carefully expressed their consideration of the minimisation conditions in relation to Scope 1 and Scope 2 emissions (which amounted to two per cent of the Project's emissions),  the IPC did not specifically address or refer to the possibility of imposing such conditions with respect to Scope 3 emissions on the basis those emissions would be accounted for in the countries to which the coal was exported.  Consequently, their Honours held that the IPC failed to consider whether conditions should be imposed to ensure that GHG emissions are minimised to the greatest extent practicable.

Importantly, Gordon J also noted that:

While it may be accepted that, as observed by the Commission in Mullaley, some aspects of Scope 3 emissions will be beyond the direct control of the development proponent, "conditions aimed at ensuring ...  that [Scope 3] emissions [were] minimised to the greatest extent practicable" could have been considered to be imposed.  As Adamson JA observed in the NSWCA below:

"There was plainly much more that the Commission could have done by imposing conditions in relation to the 98% of emissions which would be generated by the [P]roject.  It could, for example, as Ms Sharp SC, who appeared with Mr Thompson for Denman, submitted, have imposed conditions such as requiring the coal to be washed before it is exported; limiting the coal that is exported to coal of a certain high calorific content or that the coal be exported only to those countries which have NDCs under the Paris Agreement (or equivalent in the case of an entity such as Taiwan); requiring that coal exported from the [P]roject only be used in power stations which use technology such as carbon capture and storage or fluidised bed combustion; or requiring that MACH implement offsets to the emissions caused by the coal."

Such conditions may have been largely directed towards the minimisation of downstream Scope 3 emissions attributable to "third-party emissions from the combustion of product coal from the Project", although an offset condition might have been imposed in relation to all categories of Scope 3 emissions.  Whether the total permitted output of the mine could have been reduced or a condition could have been imposed on MACH selling the Project's coal only to countries that had undertaken to make significant reductions in their greenhouse gas emissions were not the subject of submission or argument.  What can be stated is that although the Commission was required to consider issuing the consent "subject to conditions aimed at ensuring ...  that greenhouse gas emissions are minimised to the greatest extent practicable", including Scope 3 emissions (both upstream and downstream) of the Project, it did not do so.  By failing to turn its attention to this issue, the Commission also deprived itself of any opportunity to request further submissions about the availability or desirability of such conditions.

Dissenting judgment

In their dissenting judgment, Gageler CJ and Jagot J concluded that it cannot be inferred that the IPC failed to comply with s 2.20(1)(c) of the Resources SEPP, as the IPC did consider whether to impose conditions.

Gageler CJ and Jagot J concluded that the IPC had to "consider an assessment of the [GHG] emissions (including downstream emissions) of the development, and must do so having regard to any applicable State and national policies, programs or guidelines concerning [GHG] emissions".  Given the content of those State and national agreements and policies, Gageler CJ and Jagot J considered it was appropriate for the IPC to explain their operation in the context of Australia's international commitments and said that:

The Commission's point was not that the operation of these agreements and policies made s 2.20(1)(c) irrelevant.  The proper inference is that the Commission's point was that, in the context of these agreements and policies, which focus on global co-operation to achieve reductions in global greenhouse gas emissions, it was satisfied that the imposition of conditions regulating scope 1 and 2 greenhouse gas emissions appropriately discharged its function of considering conditions to ensure that all greenhouse gas emissions (including scope 3 emissions) of the development are minimised to the greatest extent practicable.

What does this mean?

As the decision turns on the specific wording of clause 2.20 of the Resources SEPP in NSW, it will have important practical implications for both consent authorities and proponents of mining, petroleum and extractive industry projects in NSW that generate significant Scope 3 emissions:

• Consent authorities must actively consider Scope 3 emissions conditions.  Authorities cannot discharge their obligation under s 2.20(1)(c) of the Resources SEPP simply by noting that Scope 3 emissions will be “accounted for” in overseas inventories or under international agreements such as the Paris Agreement.  They must engage in an active intellectual process directed at whether conditions could minimise those emissions.

• A wide range of conditions may need to be considered.  As the majority noted, authorities could consider conditions such as requiring coal to be washed before export, limiting exports to coal of a certain calorific content, restricting sales to countries with emissions reduction commitments, requiring the use of carbon capture technology, or imposing offset obligations, even if some of those conditions are ultimately not imposed.

• Proponents face greater conditions risk.  Resource project proponents should expect consent authorities to engage more closely with Scope 3 emissions during the assessment phase and the concomitant risk of more specific conditions regulating Scope 3 emissions.  Proponents should be prepared to address, in their applications and supporting material, what conditions relating to Scope 3 emissions could practicably be imposed, and why those conditions may or may not be appropriate.  We note that the recent HVO expansion approval granted by the IPC requires the preparation of a Greenhouse Gas Mitigation Plan in consultation with the EPA as well as implementation of a Scope 3 Management Plan that describes protocols to ensure that reasonable and feasible measures are implemented to limit exports to jurisdictions that are parties to the Paris Agreement and other jurisdictions that the Planning Secretary considers have policies for reducing GHG emissions consistent with the goals of the Paris Agreement.

Lastly, this decision is specific to NSW as it concerns the interpretation of a requirement in the Resources SEPP which requires a consent authority to consider whether or not the development consent should be issued subject to conditions to ensure that greenhouse gas emissions are minimised to the "greatest extent practicable".  Therefore, other jurisdictions that do not have these policy settings may not need to adopt a similar approach in determining how to regulate scope 3 emissions.