New guidance issued on assessing the effects of Scope 3 emissions in UK offshore oil and gas projects

Key takeaways

• The guidance is clear that developers must assess the impact of scope 3 emissions from downstream combustion. This applies even if the developer argues that the hydrocarbons will substitute other sources or will not be fully combusted. 
• The government has tried to take a pragmatic approach, and has purposefully avoided being overly prescriptive in describing the methods that must be used to assess scope 3 emissions. The emphasis is on conducting the assessment in accordance with “current, credible and widely accepted” principles, rather than on any specific methodology. The guidance also indicates that “well-established methods” for reporting scope 3 emissions within the industry may be acceptable. Although this leaves some scope for inconsistency in the approach taken between different local authorities to assessing scope 3 emissions, provided that developers (a) can justify the methodology they select to assess the volumes and impacts of scope 3 emissions by reference to industry standards and (b) conduct a robust analysis, the extent to which planning consents can be successfully challenged before the courts on the basis of failure to adequately assess the impact of scope 3 emissions should be limited.
• Although mitigation measures continue to play a role in assessing the impact of scope 3 emissions, the guidance makes it clear that OPRED does not currently consider carbon credits to be an effective mitigation measure for the purpose of the Offshore EIA Regulations.

The guidance

The guidance confirms that: 

1. The impact of global scope 3 emissions must be assessed

• Unsurprisingly, the guidance states that an assessment of the “likely significant effects” of a project should take into account the impact that the release of “global” GHGs on climate and be carried out in the context of the UK’s net zero target and associated carbon budgets.

2. Determining the baseline

• When conducting an EIA, developers are required to provide an assessment of the baseline scenario. The guidance clarifies that the baseline scenario must (a) take into account global GHG emissions and (b) be assessed in accordance with up to date environmental information and scientific knowledge on global GHG emissions and climate, which is well documented.

• Notably, the guidance does not specify any methodology or “knowledge” that should be used by developers or provide further information on what knowledge will be deemed “well documented”. 

3. Estimating emissions: (rebuttable) presumption of full combustion

The guidance provides that emissions should be:

• Calculated (1) assuming that all hydrocarbons produced over the lifetime of the project will be combusted and (2) using the highest anticipated production volume of hydrocarbons (P10 data). This reflects the ruling in Finch, where the court found that “the whole purpose of extracting fossil fuels is to make hydrocarbons available for combustion”.
• Presented against a “no project” scenario (that is a scenario where the project did not go ahead).

Alongside the above analysis, developers may also:

• Provide an assessment of scope 3 emissions in a scenario where not all hydrocarbons are combusted. 
• Further break down the scope 3 emissions into different downstream categories relevant to the eventual use of hydrocarbons and provide an assessment of each category. 

Once again, the guidance grants developers broad discretion on the methods used to calculate emissions. It specifies only that, when calculating emissions, developers should:

• Use government-approved conversion factors or other credible sources to estimate emissions.
• Explain and justify the methodology adopted and conversion factors used.

4. Evaluating the significance of the effects of scope 3 emissions

• The guidance emphasises that an EIA must use a matrix to assess the magnitude and significance of scope 3 emissions including the cumulative effects of the emissions and their alignment with global climate goals (for example, the Paris Agreement). Given the global context and the impact of GHG emissions, the guidance states the sensitivity level assumed will be high.
• In addition, OPRED expects developers to contextualise emissions using global emissions-reduction pathways and not just raw numbers. 
• However, the guidance does not specify how developers should conduct the exercise of assessing the cumulative impact of, and contextualising, emissions, leaving this as a matter for developer discretion. OPRED will consider the significance of environmental effects on a case-by-case basis. 

5. Mitigation measures

• OPRED is clear that developers must propose realistic and verifiable mitigation measures and consider these as early as possible for a proposed project. Where the assessment of GHG emissions identifies a likely significant averse effect, consideration must be given by the developer to identifying suitable mitigation measures. 
• The guidance also stresses the continuing obligation on developers to deliver mitigation methods stating that, where developers intend to select mitigation methods, they must provide confirmation that these are permanent. 
• Significantly, carbon offsetting (for example, through voluntary carbon markets) is not considered a sufficient mitigation method, pending the outcome of the government consultation on the implementation of the Principles for High Integrity Voluntary Carbon and Nature Markets.

6. Existing projects

• OPRED has also provided guidance on existing projects, confirming that, if production levels change, a reassessment of scope 3 emissions may be required when an application is made to amend the daily production rate of the existing consent.  
• Although the guidance does not explicitly deal with this point, it does not indicate that projects that have already received planning consent would retrospectively be required to assess the impact of scope 3 emissions other than to the extent that the above scenario applies.

The authors wish to thank Beatrice Shah Scott, Norton Rose Fulbright LLP, for her contribution.