Scope 3 Exits the Accounting Blind Spot

The Mount Pleasant case illustrates a shift in regulatory risk. MACH Energy's project was set to extend mining by twenty-two years, to 2048, and double annual output. Of the 876 million tonnes of CO2 equivalent expected, 860 fell under scope 3 — essentially the combustion of coal in importing countries. The planning authority had envisaged conditions only for direct and energy emissions, roughly 2% of the total, on the grounds that the rest would be accounted for by consuming countries.

By three votes to two, the High Court ruled that this reasoning misconstrued the State's planning rule, which requires consideration of conditions reducing emissions "as far as possible." Two of the judges stressed that scopes are an accounting tool: they have no equivalent in international law and cannot neutralize a duty to reduce. For an operator, the consequence is direct: nearly the entire carbon footprint of a project now falls within the scope of administrative review.

A Movement That Extends Beyond Australia

The decision is part of a series. On 20 June 2024, the UK Supreme Court ruled, in Finch, that combustion emissions from extracted oil are effects of the project and must appear in the environmental assessment. The EFTA Court adopted an identical reading of the European directive on 21 May 2025. On 28 October 2025, the European Court of Human Rights required an assessment of these emissions before any oil production in Norway.

The legal path differs. European courts reason on the scope of the assessment, whereas the Australian text requires deliberation on concrete reduction measures: coal washing, calorific value thresholds, restrictions on export destinations or offsets. For companies, the notion of compliance shifts from informing the public to demonstrating levers for action.

Political Circumvention, the Second Risk

The political response came on 19 October. The New South Wales government announced a project-specific law granting the mine legal authorization to produce 16.5 million tonnes per year until 2032, in exchange for a job guarantee. The planning ministry had already authorized 12.5 million tonnes until that date: the law would therefore increase production by nearly a third. It would come with scope 3 reduction conditions — precisely what the authority had not envisaged — but set by the legislature for a single company, without adversarial administrative deliberation.

This mechanism requires reading the risk in both directions. The judge can compel the administration to examine what the law requires it to examine, but cannot compel the political power to decide otherwise. For an investor, an authorization obtained by law may seem more solid than an administrative permit, but it remains exposed to political alternation and reputational opprobrium.

Climate and Energy Signals Pulling in Opposite Directions

The context reinforces this ambivalence. On one side, the climate trajectory remains unfavorable: TotalEnergies' central scenario, which extends current policies, leads to +2.6 to +2.8 °C by 2100, and even its most ambitious scenario no longer achieves 1.5 °C. Peak global oil demand is anticipated between 2035 and 2040. Investment flows are shifting: low-carbon investments rose from $1.2 trillion in 2015 to $2.1 trillion in 2025. Meanwhile, 2026 is on track to match 2024 as the hottest year on record — a signal that fuels demands for scrutiny.

On the other, supply security argues for fossil supply. The European Union enters winter with gas stocks at 75% — below the 80% threshold and the lowest since 2013 — after the closure of the Strait of Hormuz deprived it of more than 60 billion cubic meters of LNG between March and October. European gas rose 30% in October. In this climate, governments have little appetite for rules that would curb production, which explains the type of reaction seen in New South Wales.

What This Changes for Compliance and Investment

Three practical lessons emerge. Authorization files must first incorporate downstream reduction measures, failing which the decision can be annulled. Long-term projects that depend on a single authorization then carry a timing risk: the mine remains subject to proceedings before the remittal court, and the outcome will depend on the measures proposed by the operator. Finally, the risk is geographic. Australia's federal mechanism for capping emissions from major sites covers only scope 1, and its ongoing revision does not contemplate extending it, leaving the decision's reach outside New South Wales in suspense.

The same type of tension is visible in gas projects. An NGO has challenged ExxonMobil over the Papua LNG project in Papua New Guinea, ahead of an expected government decision in December: it flags 27 species threatened with extinction, including the Bulmer's fruit bat, which reportedly numbers fewer than 200 adults in the wild. This is not about scope 3 but another vector of environmental risk with the same logic: a fossil project, an imminent public decision and external scrutiny pressure.

The Limits of the Analysis

Several elements call for caution. The Australian decision is a legality review: the Court does not say which conditions to adopt, and the case may end in validation with conditions. The State law may also strip the judgment of its practical reach. The file contains no data on investors' financial exposure, on valuations or on litigation costs: the scale of the risk therefore cannot be quantified. The signal of a 2026 on par with 2024 rests on a summary without temperature data.

A Proportionate Conclusion

Scope 3 litigation does not block fossil projects, but it raises their uncertainty. Companies must now demonstrate reduction measures downstream of their activities, while states can still rule in favor of production when jobs or supply are at stake. For investors, the variable to watch is less the rule itself than its stability.

This article was written with the assistance of artificial intelligence and verified by our editorial team.