COURT: IF YOU DIG IT UP, YOU OWN THE DAMAGE
A stark warning to Australia’s fossil fuel investors: Europe is raising the bar. Climate impact now counts in full.
Mik Aidt Australian matters, Educational Leave a comment
Australia’s federal and state governments continue to approve new gas terminals and coal mines without fully counting the damage they will do to the planet. But Europe is now showing another way forward: ‘Scope 3′ emissions can no longer be ignored.
Europe’s courts have drawn a firm line in the sand: oil and gas projects can no longer be approved without fully counting the climate damage they cause. Not just at the drill site, but all the way through to when the fuel is burned by consumers.
Anyone wanting to understand the legal, financial and moral shift taking place – and how it is going to shape Australia’s politics in the near future – read on!
In this article I will break down for you what the new European court rulings mean for Australia: why ‘Scope 3’ emissions now matter more than ever, and why Australia’s outdated approach to fossil fuel approvals is looking increasingly out of step with the global tide.
Emissions are no longer just “someone else’s problem”
The thing is: while Australia continues to debate how and when we should move away from fossil fuels, Europe has taken a bold legal step forward. Courts there are now making it clear: if a company wants to drill for new oil or gas, it must first show the full impact that project will have on the climate – not just at the drilling site, but all the way through to when the fuel is eventually burned by consumers. That includes the carbon pollution from petrol in cars, gas used for heating, or oil burned in power stations.
Courts … : if a company wants to drill for new oil or gas, it must first show the full impact that project will have on the climate .. all the way through to when the fuel is eventually burned ..
If this legislation was in place in Australia today, Woodside’s Northwest Shelf extension, Viva’s gas terminal in Geelong, and so many of the other fossil fuel projects currently in the planning-pipeline in Australia, would never be given the green light to go ahead.
This legal change was underlined in a major court decision in Europe in May 2025, when The European Free Trade Association Court (EFTA) said governments can no longer approve new oil and gas projects unless they properly assess their total climate impact, including what’s called “Scope 3 emissions” – the emissions caused when people use the fossil fuels.
The court ruled that these emissions are not just someone else’s problem – they are a direct and foreseeable result of allowing the project in the first place. So, if you dig up oil or gas, you are responsible for what happens when it gets burned. And this must now be considered from the very beginning of the approval process.
Why it matters: burning is the biggest problem
The key issue here is Scope 3 emissions. These are the emissions that happen after fossil fuels leave the ground – when they are transported, refined, and eventually burned. Even though oil and gas companies don’t burn the fuel themselves, these emissions are a direct result of their business.
And they are huge. For oil companies, Scope 3 emissions make up the vast majority of their total pollution – up to 95% in some cases. Ignoring them is like ignoring the elephant in the room.
For oil companies, Scope 3 emissions make up … up to 95% in some cases.
The court said that since it’s obvious what will happen once the oil and gas are sold, those future emissions must be counted. If we know it will be burned, we can’t pretend it won’t cause harm. Europe’s top judges are saying: let’s be honest about the damage from fossil fuels, right from the start.
A domino effect across Europe
This isn’t just one court making waves. The UK Supreme Court said something very similar in a case called the Finch ruling. They agreed that downstream emissions – Scope 3 – must be included when projects apply for approval.
It’s part of a growing trend: European courts are using existing laws to demand more thorough environmental checks, even before politicians have time to update the rules.
What this means is that regulators in many countries will now need to lift their game. Developers can no longer use loopholes or narrow definitions to avoid counting the full climate cost. And because these decisions apply early in the planning process, some projects might be stopped before they even get going – saving time, money, and emissions.
No more “drug dealer defence”
This legal shift also takes aim at an old excuse: that fossil fuel companies aren’t responsible for how their products are used. Sometimes this has been called the “drug dealer defence” – the idea that selling the product doesn’t make you responsible for the harm it causes.
“drug dealer defence” – the idea that selling the product doesn’t make you responsible for the harm it causes
The courts disagree. They say it is totally foreseeable that oil and gas will be burned – and that the damage it causes to the climate must be counted. This idea of “foreseeability” could have big ripple effects. In future, it might be used to argue that companies have a legal duty to warn investors, or even to stop some projects from going ahead entirely.
A warning to investors: fossil fuel projects may not stack up
The new rules aren’t just a legal headache. They change the money game too. If companies have to factor in the full climate cost, many fossil fuel projects may no longer look financially sound. Investors might see them as too risky – especially with the risk of getting stuck with “stranded assets” that lose value.
If companies have to factor in the full climate cost, many fossil fuel projects may no longer look financially sound
Already, some fossil fuel companies are trying to downplay these rulings. But analysts say it’s clear: big new oil and gas developments now face much tougher hurdles. Banks, insurers, and fund managers are paying closer attention. And the flow of money might start shifting to cleaner, safer energy alternatives.
Europe has had it’s climate wake-up call. Will Australia listen?
So what does this mean for us here in Australia? Well, our federal and state governments are still approving gas terminals and coal mines without fully counting the damage they will do to the planet. But Europe is showing another way forward.
Their courts are saying: enough is enough. You can’t keep ignoring the biggest part of the climate problem. If you plan to pull more fossil fuels out of the ground, you need to be upfront about the harm it will cause.
Australia might be behind on this, but the direction is clear. Change is coming – whether through the courts, through investors pulling out, or through growing public pressure.
Europe’s example gives us a blueprint to rethink how we approve and assess fossil fuel projects. This is a wake-up call the Albanese government can’t afford to ignore if it has any ambition of staying in government after 2028.
What are Scope 3 emissions – and why do they matter?
Scope 3 emissions are the indirect greenhouse gases released by others, as a result of your business activity. In the fossil fuel industry, they’re mostly caused when people actually use the oil, gas or coal – burning it in cars, power stations or homes.
They’re not just a small part of the story – they’re the biggest part. For oil and gas companies, Scope 3 emissions often make up more than 80% of the total pollution their products cause. That’s why Europe’s courts are now saying: if you want approval to extract fossil fuels, you must also count the emissions created when they’re used.
You can’t keep selling the match and pretending you’re not involved in the fire.