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ABRAGET vs. State of Rio de Janeiro (Decree on Energy Compensation Mechanism)

Jurisdiction: Court of Justice of the State of Rio de Janeiro


Principle law(s): Law 12.187/2009, establishing the National Policy on Climate Change (NPCC), regulated by Decree 7.390/2010


Side A: ABRAGET (Ngo)


Side B: State of Rio de Janeiro (Government)


Core objectives: Whether a state energy compensation mechanism imposes an excessive legal burden on energy companies.


Summary
On August 12, 2013, ABRAGET filed a claim with a request for an injunction against the State of Rio de Janeiro. The plaintiff challenges State Decree 41,318/2008, which establishes the Energy Compensation Mechanism (ECM) as part of the Greenhouse Gas Emission Abatement Plan, in order to combat global warming and strengthen the energy supply in the State.

The decree imposes conditions for obtaining environmental permitting aimed specifically at companies in the energy sector based on fossil fuels, at the state level. The plaintiff states that the planned changes would demand high financial costs, excessively burdening the associated plants. It alleges a breach of the federal government's competence to legislate on electric energy. It further argues that the decree is unconstitutional due to a lack of a previous law to be regulated. It also adds a request for suspension of the effectiveness of the decree. This is based on the National Policy on Climate Change - PNMC (Federal Law 12.187/2009), which, as argued by the plaintiffs, supervened the decree, emphasizing that the national law does not establish any compensation for the energy sector. It clarifies that Brazil has internalized the United Nations Framework Convention on Climate Change - UNFCCC (enacted by Decree 2652/1998), but has made a reservation regarding Annex I, so that it is outside the goals of reducing greenhouse gas emissions. ABRAGET argues that the mitigation commitment provided for in the PNMC is voluntary, and not linked to the environmental permitting process. It requests (i) the granting of anticipation of the effects to suspend the effects of the decree and (i) at the end, the judicial determination for the State of Rio de Janeiro to refrain from enforcing Decree 41.318/2008.

In response, the defendant State pointed out on November 29, 2013 that the energy compensation mechanism was edited to mitigate and compensate for the scientifically unequivocal adverse environmental effects of energy production. It emphasized the common competence of the federative entities for the adoption of environmental protective measures, and that the member state observed the precautionary principle. The state argued that as thermoelectric plants are more polluting, the discrimination adopted by the State is in accordance with the reality of the facts, and the measure is proportional. The state argued that the decree was not incompatible with the PNMC. Finally, among other issues, it defended the legality and constitutionality of the decree and requested the dismissal of the plaintiff's request.

On March 6, 2015, the trial court dismissed the plaintiff's request, emphasizing that the judiciary, when carrying out control of public policies, must honor the purposes of the state, given that the decree contributes to the intergenerational maintenance of a healthy environment. The plaintiff appealed reaffirming the points of the initial petition and requested the annulment of the decision. On February 7, 2017, the appellate court considered the evidence of decree's unconstitutionality to be strong, raising an incident of unconstitutionality to be resolved before the Court's Special Body.

On September 12, 2017, within the scope of the claim of unconstitutionality, the Court's Special Body decided for the validity of the decree, emphasizing, among other issues, that it is an activity inherent to the environmental administrative function with a view to materializing protective measures for the environment. After the decision, the plaintiff stated that the discussion on the application of the decree to ABRAGET's associates remained. A decision was handed down stating that the appellant's claim - to determine the non-application of Decree 41.318/08 to its associates - is generic, not being possible to fulfil the request. In addition, the court stated that any assessment of the improper application of conditions to the contracts in force should be carried out in a separate action. Therefore, the author's appeal was dismissed.

Subsequently, ABRAGET filed an Extraordinary Appeal, which was held inadmissible. The plaintiff filed an appeal to the Federal Supreme Court (STF). On August 7, 2018, within the scope of the Extraordinary Appeal (ARE 1.317.221/RJ), the Justice, in a monocratic decision, held that the Court has consolidated jurisprudence on the concurrent competence between the federated entities to legislate on environmental protection. Since it would be necessary to go through the factual-evidence review and the interpretation of local legislation to verify that the decree refers to environmental protection standards, and not electricity, it could not hear the case.

The plaintiffs further filed an Interlocutory Appeal, which was denied by the 2nd Panel of the Court. The case is currently pending in the Supreme Court.

Case documents

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