Environmental campaigners had argued that planning permission to retain and expand an oil well site near London's Gatwick Airport was flawed, because it had not considered the impact of greenhouse gas emissions from the use of the oil.
Supreme Court judges agreed by a narrow three to two majority, quashing the planning approval, which they said was unlawful.
"It is not disputed that these emissions, which can easily be quantified, will have a significant impact on climate," said George Leggatt, one of the three Supreme Court justices who agreed with the appeal.
"The only issue is whether the combustion emissions are effects of the project at all. It seems to me plain that they are."
Campaigners said the landmark judgment would make it much harder for new oil, gas and coal developments to get approval, and other controversial schemes would be impacted.
"This historic ruling is a watershed moment in the fight to stop further fossil fuel extraction projects in the UK and make the emissions cuts needed to meet crucial climate targets," Friends of the Earth lawyer Katie de Kauwe said.Â
"It is a huge boost to everyone involved in resisting fossil fuel projects."
The government's Department for Energy Security and Net Zero did not immediately respond to a request for comment on the ruling.
The case concerned a decision in 2019 by Surrey County Council to allow Horse Hill Developments, part-owned by British energy company UK Oil & Gas Plc, to retain two oil wells and drill four more over the courts of more than 20 years, near the town of Horley, close to London's Gatwick Airport.
An Environmental Impact Assessment for the project examined the effect of the construction, production and decommissioning of the site, but did not assess the impact from emissions that would result from the use of the oil.
The Weald Action Group (WAG), an umbrella organisation for local groups that campaign against the extraction of oil and gas in southeast England, estimated this would equate to more than 10 million tonnes of carbon emissions.
A campaigner acting for WAG launched a legal challenge against the planning approval, but this was rejected both by the High Court in London and then by the Court of Appeal.
In his Supreme Court judgment, Leggatt said combustion emissions from the refined oil were inevitable.
"The reasons accepted by the council for excluding the combustion emissions from consideration and assessing only direct GHG emissions from within the well site boundary are therefore demonstrably flawed," he said.
