22 Dec 2011

Climate change test case struck out - no implied limit on CO2 emissions

Climate change action group Rising Tide has failed in its attempt to curtail Macquarie Generation's emission of CO2 from the Bayswater power station using NSW pollution laws (Clayton Utz acted for Macquarie Generation in the proceedings).

The basis of Rising Tide's claim was that there was an implied condition or limitation in Macquarie Generation's environment protection licence issued under the Protection of Environment and Operations Act 1997 (PEO Act) to limit the total amount of CO2 that could be emitted into the atmosphere. The action group alleged that the implied condition required Macquarie Generation to only emit an amount of CO2 which had "reasonable regard and care for the interests of other persons and/or the environment." It also alleged that there was a limitation on the amount of coal that could be burnt at the power station, based on a statement contained in the 1980 environmental impact statement for the power station.

The NSW Land and Environment Court had previously held that Macquarie Generation did have lawful authority to emit carbon dioxide, but that it was reasonably arguable that the authority conferred by the licence was subject to an "implied" or "common law" limitation or condition which prevented Macquarie Generation from emitting CO2 in excess of such a limit.

This morning, the Court of Appeal upheld Macquarie Generation's appeal and dismissed the remainder of Rising Tide's claim, holding that there were no implied conditions as:

  • implied conditions of this sort are inconsistent with the statutory regime for licensing activities under the PEO Act; and
  • a limitation on the amount of coal which could be burnt at the power station, by reference to a single statement in the environmental impact statement, could not be implied as a licence condition.

It also held that a statutory breach could not be founded on a common law cause of action.

What does this mean for licence-holders under the PEO Act?

The judgment makes clear that the test for implying statutory conditions is analogous to that of implying conditions in a contract and that relevantly, conditions will not be implied into a licence unless they can be shown to be necessary, obvious, clear and consistent with the express terms of the licence. The Court will not imply a condition which is inconsistent with the statutory regime within which it operates.

The judgment provides much needed certainty to holders of licences authorising specific activities, that the terms of that licence won't be subject to arbitrary implied conditions or limitations which are inconsistent with statutory regime under which they are issued.

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