The European Court of Justice (EJC) held that a coal-fired power plant and unburned coal in a storage site constitute one installation covered by the EU Emissions Trading Scheme (EU ETS). The EJC further concluded that the coal lost due to self-heating while in storage could not be regarded as exported fuel for purposes of monitoring emissions.
Elektriciteits Produktiemaatschappij Zuid-Nederland EPZ NV (EPZ) operates a coal-fired power plant in the Netherlands and holds a quantity of its unburned coal in a storage site approximately 800 meters from the power plant, which is separated from it by a public road. When designing the monitoring plan for the installation operated by EPZ for the third period of the EU ETS, the Dutch Emissions Authority (Nea) determined that coal lost due to its self-heating during the storage period could not be regarded as fuel exported from EPZ’s installation within the meaning of Article 27(2) of Regulation No 601/2012.
Consequently, the NEa refused to approve modifications of the monitoring plan sought by EPZ and later rejected EPZ’s objection to their initial decision. EPZ then lodged an appeal with the Dutch Raad van State (Council of State), seeking to have the latter decision annulled. The Council of State referred the case to the EJC and asked for a preliminary ruling on two questions.
(1) Could EPZ’s storage facility be considered an “installation” as referred to in Article 3(e) of Directive 2003/87/EC, which established the EU ETS?
(2) Could EPZ’s lost coal due to its self-heating during storage be considered “fuel exported from the installation” as referred to in Article 27(2) of Regulation (EU) No 601/2012? That provision allows operators to deduct the quantity of fuel exported from the installation for purposes of monitoring greenhouse gas emissions.
On the first question, the ECJ ruled that a fuel storage site of a coal-fired power plant is part of an “installation” within the meaning of Article 3(e) of Directive 2003/87/EC. The ECJ reasoned that the coal’s self-heating during storage does not amount to combustion and that it was not apparent that the coal’s self-heating required 20 MW of thermal input - two of the requirements for the storage site to be considered an installation under Annex I of Directive 2003/87/EC. However, the ECJ ruled that the coal is essential to the functioning of the power plant and is therefore directly associated with the plant’s activity. Moreover, because the coal’s self-heating emits greenhouse gases, storing coal is an activity that could have an effect on emissions and pollution within the meaning of Article 3(e) of Directive 2003/87/EC. The ECJ deemed it irrelevant that the storage site is located approximately 800 meters and across a public road from the power plant.
On the second question, the ECJ ruled that coal lost due to self-heating while in storage on a site that is part of an installation cannot be regarded as coal exported from that installation. Because the storage site is part of an installation within the meaning of Article 3(e) of Directive 2003/87/EC, it cannot be regarded as a separate installation. Therefore, coal lost due to self-heating cannot be considered to be exported from the installation in question.