The Court of Appeal returned a ruling on 27 February 2020 that the UK government's policy statement which included the government's approval of the Heathrow expansion was unlawful because it did not consider the impact of the project on the UK's climate change obligations under the Paris Agreement.
The decision comes hot on the heels of the Dutch Supreme Court decision in December 2019 in the case of Urgenda Foundation v State of the Netherlands, which found that the government of the Netherlands was contravening articles 2 and 8 of the ECHR – the right to life and the right to private and family life – by failing to provide a more ambitious greenhouse gas reduction target for the end of 2020.
In the wake of these decisions, it is likely that we will see far greater weight being given to reducing carbon emissions and other environmental considerations in government decisions, particularly in the areas of infrastructure and planning, or in areas where increased levels of public scrutiny are likely to be a factor.
Businesses would be prudent to consider their own policies on greenhouse gas emissions and other sustainability concerns and ensure they are acting consistently with their own messaging. Investors, shareholders, employees and customers alike are increasingly focused on climate concerns, and may be paying closer attention than ever to compliance with environmental policies and objectives. In any event, climate conscious financial decisions are expected to prove beneficial in the long term.
The case
The Court of Appeal heard several challenges, from local authorities and environmental non-profit organisations, concerning the legality of the process which produced the Airports National Policy Statement (ANPS), setting out plans for a third runway and increased infrastructure at Heathrow Airport.
The ruling handed down found that the processes which led to the policies contained in the ANPS were unlawful because the Transport Secretary had failed to take into account the Paris Agreement on Climate Change, which seeks to reduce carbon emissions and limit global warming to below 1.5-2 degrees Celsius.
The court found that the UK's obligations under the Paris Agreement should have been considered by the Secretary of State for Transport when preparing the ANPS and that an explanation of how it had been taken into account should have been provided. There was an error in law in the preparation of the ANPS, as the government did not follow its own procedure as set out in the Planning Act 2008, in particular section 5(8) which requires that each piece of national policy "must… include an explanation of how the policy set out in the statement takes account of Government policy relating to the mitigation of, and adaption to, climate change".
Government policy relating to climate change includes compliance with the UK's obligations under the Paris Agreement. The UK is currently on track to meet its obligations for the reduction of carbon emissions for the period 2018-2022, but it seems increasingly unlikely that it will achieve the necessary reductions to meet the targets for the 2023-2027 period without there being significant further policy interventions.
The Court of Appeal's ruling makes the decision to expand Heathrow Airport unlawful unless and until the Transport Secretary has taken the UK's obligations under the Paris Agreement into account in making the decision.
The Court of Appeal has been explicit in stating that it has "not decided, and could not decide, that there will be no third runway at Heathrow." (para. 284) It has also not decided that:
- Any policy statement supporting the expansion is incompatible with the UK's obligations under the Paris Agreement;
- That the Transport Secretary is obliged to act in accordance with the Paris Agreement; or
- That the Transport Secretary must reach any particular outcome.
Rather, the ruling finds that there is an obligation on the government to consider the Paris Agreement in making its decision and therefore, the government should make a second pass at the ANPS, this time taking into account its obligations under the Paris Agreement.1
Recap: The Paris Agreement and the UK Climate Change Act 2008
The Paris Agreement on Climate Change was adopted in 2015 and saw every signatory, including the UK as a member of the European Union at that time, pledge to reduce emissions by 40% from their level in 1990 by 2030. It also includes a firm commitment to restrict the increase in global temperatures to below 2 degrees Celsius above pre-industrial levels, whilst pursuing efforts to limit the temperature increase to only 1.5 degrees. The UK ratified the Paris Agreement in November 2016.
The UK enacted the Climate Change Act in 2008, becoming the first country to introduce long-term, legally binding national legislation to tackle climate change. This Act includes a commitment to reduce carbon emissions by 80% from their level in 1990 by 2050 by a series of five yearly "carbon budgets" and to develop a climate change adaptation plan. Because these commitments have been enshrined in UK law, Brexit does not impact the UK's carbon emission obligations.
The UK was also the first major economy to legislate for net zero greenhouse gas emissions by 2050 and has since launched a Net Zero Review to help determine how the UK can maximise economic growth opportunities as it transforms into a green economy.
What the ruling means for businesses
The Court of Appeal's ruling means that climate change has to be explicitly considered as part of UK national aviation policy. The Court has not only brought section 5(8) of the Planning Act to national attention but has explicitly brought the Paris Agreement into the sphere of considerations that are covered by this section of the Act. The government will have to make sure that when making any infrastructure and development policies and plans going forward, the climate change ramifications of those policies have undergone specific analysis and consideration.
The increased focus on climate change policies is already translating to businesses, whose sustainability and environmentally-friendly practices are part of non-financial reporting requirements and are of growing concern to shareholders, investors and customers. Non-financial reporting on environmental, social and governance (ESG) metrics are increasingly expected from large and sophisticated businesses. The UK Stewardship Code is expected to be updated this year to place ESG considerations and reporting at the heart of regulated asset management and the revised UK Corporate Governance Code requires premium-listed companies to report on the business purpose and the business impact on wider society, which will include reporting on environmental impact. There are many advantages to companies of being climate conscious, including:
- increased understanding of climate-related risks and opportunities, enabling better risk management and strategic planning;
- potential expansion of investor base and improved credit ratings and worthiness;
- better long term sustainability by moving away from reliance on fossil fuels; and
- better corporate reputation and improved relationship with investors, shareholders and customers which will drive sustainable long-term profit.
The European Commission Guidelines on non-financial reporting also set out a number of advantages to non-financial reporting.
For businesses to be economically sustainable, it looks as though they will have to be environmentally sustainable as well. Some companies have not only committed to be carbon negative by 2030, but they have gone further and are aiming to remove all historical carbon emissions since they were founded. Whilst the Court of Appeal's decision does not rule that there can be no third runway built at Heathrow, it does pose an additional challenge for the project. For the plans to proceed, the government has to reach the same conclusion in a new ANPS, but this time having conducted a full analysis of the climate change impacts of the expansion project and concluded that a third runway does not jeopardise the UK's climate change commitments. Such a conclusion and any underlying evidence used to produce it will inevitably be subject to intense scrutiny.
The door is now open for other challenges to major infrastructure projects and a proposed challenge to the government's decision to approve the HS2 project has already been announced. This trend seems set to continue: the recent launch of the International Bar Association's Model Statute for Proceedings Challenging Government Failure to Act on Climate Change is intended to remove common legal hurdles for citizens, businesses and NGOs seeking to compel or challenge government action on climate change. Businesses may be concerned that the results of this case could put London's position as an international centre for business at risk, because it is not able to increase its connectivity with other markets around the world. An alternative view is that if businesses are themselves having to look inwards at their own environmental practices, then they might want to do business in a City that is also doing the same. Global climate policies and other external factors – such as coronavirus – will continue to make virtual links even more popular as an appropriate and cost-effective way to conduct business by limiting the need for business travel and the related carbon emissions.
Conclusions
The Court of Appeal's recent ruling is a clear indication that the government is expected to follow its own legislative provisions which require consideration of climate concerns when determining its domestic policy.
The recent World Economic Forum's Global Risks Report shows that climate change and associated environmental disasters are the most likely and impactful risk faced by all businesses. With the tide of climate change consciousness continuing to rise, businesses should also turn inwards to consider their own carbon emissions and broader sustainability and ESG policies, which are increasingly becoming the target of as much scrutiny as the company's profit ambitions.
As the world's powers begin preparations for the COP26 climate talks in Glasgow in November, this case ruling marks the UK out as a global leader in the fight against climate change.
- "Our decision should be properly understood. We have not decided, and could not decide, that there will be no third runway at Heathrow. We have not found that a national policy statement supporting this project is necessarily incompatible with the United Kingdom’s commitment to reducing carbon emissions and mitigating climate change under the Paris Agreement, or with any other policy the Government may adopt or international obligation it may undertake. That is not the outcome here. However, the consequence of our decision is that the Government will now have the opportunity to reconsider the ANPS in accordance with the clear statutory requirements that Parliament has imposed." (R (Friends of the Earth) -v- Secretary of State for Transport and others, [2020] EWCA Civ 213, paragraph. 285)
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