Is It Still Permissible Under EU Law to Issue New Permits for Oil and Gas Extraction?

Abstract

The combustion of fossil fuels is the main cause of climate change. Emissions from currently existing or planned fossil fuel infrastructure will greatly exceed the remaining global carbon budget associated with the objective of the Paris Agreement to stay below 1.5-2°C of global warming. According to the IPCC, meeting the Paris climate goals requires the early decommissioning of existing fossil fuel infrastructure and the cancellation of plans for new infrastructure.

The EU is party to the Paris Agreement and is committed to the 1.5°C target. It has also bound itself to ambitious climate objectives, including the reduction of net emissions by at least -55% by 2030, and reaching carbon neutrality at the latest by 2050. The EU is currently not on track to meet these objectives. According to the European Scientific Advisory Board on Climate Change (ESABCC), the EU needs to “sharply decrease the use of fossil fuels”, including by “decommissioning of coal, gas and oil facilities.” Fossil fuel extraction in a Member State necessitates regulatory approval by its authorities. The article assesses whether it is still permissible under EU law for Member States to issue new permits for oil and gas extraction, and if yes, under which conditions.

The article first examines whether GHG emissions, including those associated with the combustion of the extracted fossil fuels by end users (scope 3 emissions) must be considered in the environmental assessment under the EIA and SEA Directives. It finds that this is the case, as both Directives require the assessment of both direct and indirect environmental effects of a project or plan.

It subsequently identifies the limits to the discretion of Member States to approve new oil and gas extraction projects under EU law. To do so, it considers the climate-related obligations of the EU and the Member States under international and EU law as well as the duty of sincere cooperation and the general principles of EU environmental law. It finds that an approval decision is liable to have significant negative effects on Union climate policy. Member States must be considered to be required to deny approval of new oil and gas extraction, unless the negative effects can be remedied or justified on important grounds of public policy, such as the need to secure energy supply.

The objective of securing energy supply justifies the expansion of oil and gas extraction only if three conditions are met. First, Member States must show that the additional extraction volumes are indeed necessary in the light of Paris-compliant demand projections. Second, they must demonstrate that the same result could not be achieved by measures that do not conflict with the Union's climate-related objectives, such as reducing energy demand. Third, the approval decision must be designed in a proportional manner, limiting the negative impacts on EU climate policy as much as possible. Ultimately, a Member State wishing to authorize new oil and gas extraction must be able to demonstrate how this is compatible with the rapid phase-out of fossil fuels, which is a necessary condition for preventing climate breakdown.

Keywords: fossil fuels, environmental impact assessment, scope 3, EU, climate law, duty of sincere cooperation

JEL Classification: K32