NSW Court of Appeal tackles downstream impacts in Denman Aberdeen Muswellbrook Scone Healthy Environment Group Inc v MACH Energy Australia Pty Ltd [2025] NSWCA 163

The Project

The Project proposes to extend the operating life of the Mount Pleasant mine for an additional 22 years and extract an additional 406 million tonnes of coal beyond that approved under the existing consent.

The size of the mine is substantial. By comparison, in 2019, Gloucester Resources Limited lost its appeal to the Land and Environment Court in relation to the Rocky Hill Coal Project, an open cut coal mine that would produce 21 million tonnes of coal over a period of 16 years. In that case, Preston CJ refused consent on environmental and social impact grounds and due to downstream or “Scope 3” greenhouse gas (GHG) emissions.1

In short, Scope 3 emissions from coal mines are the indirect GHG emissions generated in the wider economy from the burning coal at sources not owned or controlled by the mine operator.

The environmental assessment for the Project indicated that the majority (98 per cent) of the GHG emissions generated by the Project would be Scope 3 emissions arising from the downstream consumption of coal by end users.²

Summary of CO₂-e emissions per scope (t CO₂-e)

The Project’s Scope 3 emissions represent approximately 0.06 per cent of yearly global GHG emissions.³

The IPC’s decision

The IPC granted consent to the Project on 6 December 2022 subject to conditions (none of which related to Scope 3 emissions).

The IPC made a range of findings in relation to the Project’s Scope 3 emissions:⁴

1. While Scope 3 emissions are not counted towards NSW’s emissions under the Paris Agreement, the impact of these emissions is still “felt globally”.
2. Although the Project’s Scope 3 emissions would contribute to climate change, these are appropriately regulated and accounted for through national policies and international agreements.
3. Scope 3 emissions are not included in the Project’s emission reporting under the Paris Agreement accounting rules and Australian legislation (to avoid double counting).
4. Scope 3 emissions are attributed to the country within which they are emitted. Almost all countries have committed to reduce global emissions and to track their progress in doing so.

Decision of Land and Environment Court

Denman Aberdeen Muswellbrook Scone Healthy Environment Group Inc (Appellant) challenged the IPC’s decision in the Land and Environment Court on eight separate grounds, including the alleged failure by the IPC to consider the impacts of the Project and its Scope 3 emissions on the locality of the mine, as required under s 4.15(1)(b).

Justice Robson dismissed the application and made the following findings in relation to the s 4.15(b) ground (at [109]-[110]):

1. The IPC accepted that GHG emissions have a cumulative impact on climate change and will negatively impact future generations.
2. The IPC concluded that the likely impacts of the Project’s Scope 3 emissions were not reason enough to refuse the approval.
3. The negative effects of climate change were acknowledged by the IPC and there was no need for it to articulate the specific impacts of climate change, which are largely impacts of climate change generally.

Issues on appeal to the Court of Appeal

On appeal, the Appellant submitted that the primary judge had erred, by finding the IPC had not failed to consider the likely impacts of the Project’s Scope 3 emissions in the locality (such as increased bushfires and prolonged droughts) as is required under 4.15(1)(b) of the EPA Act.

The Court of Appeal (Ward P, Price AJA agreeing, with Adamson JA writing separately) allowed the appeal on this ground.

The Court of Appeal accepted the Appellant’s argument that although the IPC accepted that the impact of the Project’s GHG emissions would be “felt globally”, what was required by s 4.15(1)(b) of the EPA Act was a causal enquiry into the likely impacts of climate change on the natural and built environment in the locality.⁵

Ward P held:

• Section 4.15(1)(b) required the IPC to consider the causal connection between the Project and its impacts on the environment in the locality of the Project: at [107].
• There is “nothing in the Commission’s reasons to indicate that the Commission, having accepted that Scope 3 emissions would make up 98 per cent of the Project’s GHG emissions and that those emissions would contribute to global climate change, went on to consider the impact of climate change on the locality… the combination of the statement that the effects of climate change will still be “felt globally” and the absence of reference to the impact of this on the locality specifically is to my mind a powerful indicator that the Commission did not (as required) consider the impact of climate change on the locality”: at [108].
• In so doing, the IPC “failed to engage with the essential matter with which s 4.15(1)(b) is centrally concerned”: at [109].

The range of potentially adverse impacts of climate change in the locality that were required to have been considered were outlined by Adamson J at [236] (based on evidence before the IPC) and included, in her Honour’s view, the increased incidence of extreme weather events (flood, bushfire, drought, etc.), increased temperatures and rising sea levels in the locality of the Project.

The Court of Appeal declared that the development consent was invalid for failing to consider a mandatory consideration and remitted the matter to the Land and Environment Court for consideration as to whether orders can or should be made which, if complied with, would validate the development consent.

Implications for consent authorities and project proponents

The Court of Appeal’s decision suggests that where a development has downstream impacts that are responsible for cumulative effects on the environment, consent authorities will need to consider the causal connection between those downstream impacts and impacts in the locality under s 4.15(1)(b), be they impacts on the natural and built environments, or social and economic impacts.

Until now, NSW courts have assessed cumulative impacts, including on climate change, under the public interest consideration in s 4.15(e) of the EPA Act.⁶

The position of the Court of Appeal in DAMSHEG extends the “likely impacts” that are required to be considered in relation to the locality under s 4.15(1)(b), to those cumulative impacts that occur on a regional or global scale that are contributed to by the project.

This may include a range of other “downstream” impacts that are relevant to environmental impacts at the locality-level, including deforestation, biodiversity loss and water quality degradation, particularly when the locality is particularly susceptible to those impacts.

Should you require further information on the DAMSHEG decision or advice on its application to a project, our Environment & Planning team are able to assist.