Resources industry nervous over High Court ruling projects must consider Scope 3 emissions

The High Court of Australia on Thursday established an interesting precedent – planning authorities (and thus coal, oil and gas project owners) must consider Scope 3 emissions in Australia when approving new projects.

To understand what Scope 3 emissions are, it helps to run through the whole trilogy. Scope 1 emissions are emissions produced by mining energy products in the first place; Scope 2 emissions are those caused by burning energy products to produce energy.

Scope 3 emissions, however, are emissions produced by the burning of energy products once they are sold and exported, no longer the purview of the entity (or entities) that mined and sold them.

Let’s assume Woodside sells a shipment of LNG to a Japanese customer; when the Japanese customer burns that gas back home in Japan, those are Scope 3 emissions.

So how exactly do planning authorities – or, rather, extractive energy project owners who must submit documents to those authorities – plan to mitigate Scope 3 emissions?

If this finance journalist had to guess, the answer is probably a ramp-up in offsets.

When ASIC made it mandatory for companies to report Scope 3 emissions back in 2023, the regulator clarified that companies could use carbon offsets – none of which actually reduce greenhouse emissions, but appear to be the best anybody can think of.

Plant forests, trade credits

The biggest winner of the Wednesday High Court ruling could well end up being the operators of carbon credit market exchanges. Or perhaps the companies that sell equipment to energy giants to try and pull off carbon storage – an industry trend that hasn’t been getting talked about much lately.

(Perhaps investors could have traded the news on VanEck’s carbon credits ETF, but they terminated that in mid-2025 because hardly anybody traded it.)

Perhaps predictably, the Chamber of Minerals and Energy WA (CME) was immediately vocal about the ruling in the High Court, which came on the back of an appeal against the extension of a coal mine in NSW.

While the CME release was what you’d expect – the Chamber pointed to ongoing fossil fuel demand overseas and suggested the ruling would effectively shutter Australian energy mining wholemeal – CME CEO Aaron Morey did make one pertinent point.

“Governments need to clarify what this decision means for project approvals and provide certainty for investment,” Morey said – and that’s the multi-billion dollar question.

Presumably, unless some new policy or tool is manufactured, project operators will be forced to ramp up carbon offset programs – think the planting of trees, already a dubious practice when it comes to actually mitigating the impact of climate change.

(Fun fact: carbon offset programs related to the planting and preservation of forestland are undermined by the fact many of those plantations are burning in wildfires as global warming gets worse.)

Who remembers the carbon tax?

There was one policy that was once introduced in Australia that did actually push down emissions from Australian emitters. It was the Gillard/Rudd’s government carbon tax, and it was hugely unpopular.

It was so unpopular that bodies like the CME spent billions on campaigning against it to such extent many people believe that lobbying blitz cost Gillard her government.

But it was the only policy that has actually ever caused a real decline in Australian greenhouse gas emissions – too bad, then, it would probably be political suicide.

So what does Wednesday’s High Court finding actually mean?

Time will tell, but it’s probable that with relative immediacy, environmental activists will use this precedent as a weapon.

Whether it’s blunt or sharp weapon is another big question. While the High Court decision related to a NSW appeal, the High Court is national, so there’s no restriction on activists pointing to it in other states.

And then we have the question of states – it may well be that we see other appeals slowly travel all the way up the chain to the High Court where this precedent is most solidly recognised; that could lead to the kind of bogging-down of energy project development CME WA warned of on Wednesday.

It’s true to say there’s a lot of red tape in Australia when it comes to energy extraction. It’s also true to say our summers are getting worse – and the BOM are expecting a worse-than-usual El Nino this summer.

A third truth is that the last time we had a carbon tax greenhouse emissions dropped, but good luck selling that.

Join the discussion: See what’s trending right now on HotCopper, Australia’s largest stock forum, and be part of the conversations that move the markets.

The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.