Brussels, 28/04/2016 (Agence Europe) - The European Court of Justice has granted the Commission 10 months to set a new maximum number of free quotas for greenhouse gas emissions allocated to high energy consuming industries for the 2013-20 period, as part of the European Union's Emissions Trading Scheme (ETS).
This European Court of Justice ruling made on Thursday, 28 April involves several joint cases (C-191/14, C-192/14, C-522/14, C-389/14, C-391/14, C-392/14 and C-393/14) in which companies have questioned the ceiling imposed on the industry since 2013, with regard to the number of free quotas that can be allocated every year by the national authorities. The ETS introduced a European carbons market and operates on the basis of a trading scheme, with the allocation of free quotas.
The court has invalidated the Commission's decision of 2013, which works out the intersectoral correction factor by reducing free quotas allocated temporarily by member states (see EUROPE 10916) and therefore follows the conclusions of the Advocate General in November 2015 (see EUROPE 11429). Although the judges found partially in favour of several companies, particularly those in the petrochemical sector, which produce greenhouse gas emissions in Italy, the Netherlands and Austria, the court action launched will provoke the opposite effect that they were looking for because the Commission would have to revise the quantity of free quotas downwards.
The mistake committed by the Commission, according to the Court, is to have calculated the maximum annual quantity of quotas on the basis of "all emissions included" in the Community system from 2013. It should only refer only to "the emissions of the installations included in the Community system from 2013 onwards, and not to all of the emissions included from then onwards". The Court notes, however, that this mistake was partly due to the fact that disparities existed in the different language versions of the directive, particularly between the French version and a significant number of others. Despite this translation problem, the Commission should have ensured that member states communicated the appropriate data to it, which it did not do. The Commission only took account of data of certain member states which, unlike others, communicated to it data concerning emissions generated by new activities carried out in installations already subject to the allowance trading scheme before 2013. Consequently, this distorted the correction mechanism and the maximum annual amount of allowances could have been "higher", the ruling explains.
The Court now wants the Commission to change this result and has granted it ten months to do so. During this period, the current quota exchange system will be maintained to avoid any legal loopholes arising, which would prevent the EU's greenhouse gas emissions reduction target being achieved. Similarly, in an effort to avoid "serious repercussions", the judges also decided that cancelling the correction factor would not have an effect on the final allocations that have already taken place in the member states.
Following the publication of the ruling, the Commission provided assurances that it would "Work diligently to implement the Court ruling so as to reduce the uncertainty created by the ruling as to the free allocation for industry until 2020". It also pointed out that in July 2015 it proposed a new ETS system that is expected to be, "more efficient, fairer, more predictable and which would work better" (see EUROPE 11360).
The WWF NGO was delighted with the court ruling and said "We must not allow scaremongering by a handful of large polluters to undermine the ETS" even though "The EU ETS needs to be reformed in order to make polluters pay, rather than paying polluters". (Original version in French by Jan Kordys)