United Kingdom of Great Britain and Northern Ireland v. Commission of the European Communities
Jurisdiction: European Union
Principle law(s): Revision of the EU Emission Trading System (EU ETS) (Directive 2009/29/EC amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community)
Side A: United Kingdom of Great Britain and Northern Ireland (Government)
Side B: Commission of the European Communities (Government)
Core objectives: Challenge to amendment of EU law.
SummaryArticle 1 of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community ('the Directive') provided This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.'Article 9(1) of the Directive provided that each Member State was to develop a national plan stating the total quantity of allowances that it intended to allocate for each period referred to in the Directive and notify it to the Commission.On 30 April 2004, the United Kingdom notified a national allocation plan for the allocation of greenhouse gas emission allowances (hereinafter ‘NAP') to the Commission, expressly stating it was provisional. On 7 July 2004, the Commission adopted Decision C(2004) 2515/4 final concerning the national allocation plan for the allocation of greenhouse gas emission allowances notified by the United Kingdom. Subsequently, the United Kingdom notified the Commission that it wished to amend its NAP. The United Kingdom proposed, in particular, to increase the total quantity of allowances to 756.1 million tonnes of carbon dioxide. However, the Commission indicated that it considered that the proposed amendments were inadmissible. The United Kingdom applied to the Court of First Instance requesting the infringement of the Directive and of the Decision of 7 July 2004. It stated that the NAP in question was expressly provisional and that this had been acknowledged by the Commission. The Commission contested that it had been of the view that the NAP, including the figures relating to the total quantity of allowances, had been complete. The Commission added that any amendment exceeding the total quantity of allowances was expressly excluded as Commission decisions on NAPs had to provide certainty, both for the coherence of the emissions trading system overall and in order for the allowance market to function properly, as market price building depended strongly on the utmost stability of the total quantity of allowances. Otherwise, the risk of having a series of consultations and new Commission decisions would arise. The market for allowances, being reliant on the stability of the total quantity of allowances, would be undermined and unable to function properly with such a degree of uncertainty. The court noted that in the contested decision, the Commission rejected as inadmissible the amendments of the NAP proposed by the United Kingdom because they would have resulted in the total quantity of allocated quotas exceeding the quantity authorized by the Commission in its Decision of 7 July 2004. Therefore, the Commission did not consider itself obliged to carry out any examination of the proposed amendments on their merits. In order to decide whether the Commission was entitled to reject those amendments as inadmissible, the court examined the roles and powers allocated to the Commission and the Member States respectively under the Directive, particularly those in Articles 9, 10 and 11. It concluded that the amendments of the NAP were not limited in the way expressed by the Commission. This followed necessarily from the fact that the Member State was obliged, in accordance with Article 11(1) of and paragraph 9 of Annex III to the Directive, to take account of comments received from the public after the initial notification of the NAP and before the adoption of the definitive decision under Article 11(1) of the Directive. If amendments to the NAPs, made after the expiry of the three-month period mentioned in Article 9(3) of the Directive or after a decision of the Commission, were limited in the way described by the Commission, then that public consultation would be deprived of its effectiveness and the comments of the public would be rendered purely academic. It also had to be pointed out that the purpose of the Directive was to establish an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment. Therefore, even though the Directive aimed to reduce greenhouse gas emissions in accordance with the commitments under the Kyoto Protocol, that aim had to be achieved, in so far as possible, while respecting the needs of the European economy. It followed that the NAPs developed under the Directive had to take due account of accurate data relating to emission forecasts for the installations covered by the Directive. If a NAP was based in part on incorrect information relating to the level of emissions in certain sectors, the Member State in question would have to be entitled to propose amendments to the NAP, including increases to the total quantity of allowances to be allocated, in order to address those problems before the market began functioning. The Court therefore considered that it followed both from the wording of the Directive, and from the general structure and objectives of the system which it establishes, that the Commission could not restrict a Member State's right to propose amendments. The Commission also maintained that any amendment increasing the total quantity of allowances had to be excluded because it could have an adverse effect on the stability of the market. The Court considered that this argument has not been substantiated by the Commission. The argument of the Commission that the proposed amendments would have serious repercussions on scarcity and would therefore be likely to have a significant impact on the market price was exaggerated. The United Kingdom proposed to increase the total quantity of allowances from 736 to 756.1 Mt CO2, which was an increase of 2.7%. In light of the fact that this amendment had simultaneously been published by the United Kingdom with a view to obtaining comments of the public, the operators concerned would have been aware of that increase seven weeks before the opening of the market. The argument of the Commission, based on the idea that the stability of the market amounted to an imperative rule, was exaggerated, especially with regard to amendments proposed before the opening of the market and thus it could not be accepted. The court held that the Commission made an error of law in rejecting the amendments proposed by the United Kingdom as inadmissible. Therefore, the single plea raised by the United Kingdom was declared to be well founded and the contested decision was annulled.
Related laws and policies
Revision of the EU Emission Trading System (EU ETS) (Directive 2009/29/EC amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community)
A revision and strengthening of the Emissions Trading System (EU ETS). A single EU-wide cap on emission allowances will apply from 2013 and will be cut annually, reducing the number of allowances for businesses to 21% below the 2005 level in 2020. The free allocation of allowances will be progres...