Germany

Evonik Degussa GmbH v Republic of Germany

Jurisdiction: European Court of Justice


Principle law(s): EU Emission Trading Scheme (EU ETS) (Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC)


Side A: Evonik Degussa GmbH (Corporation)


Side B: Germany (Government)


Core objectives:

 Interpretation of Decision 2011/278, to determine whether free greenhouse gas emission allowances should be awarded in the context of implementing a process of separation of hydrogen in a rich gas stream which already contains hydrogen. 


Summary
Evonik Degussa operates a hydrogen production installation; it carries out hydrogenation of rich gas and then processes it as part of a pressure-swing adsorption process, in so doing, separating the hydrogen from other substances contained in the rich gas. By decision of 17 February 2014, the German authorities made a decision to allocate Evonik Degussa allowances for the years 2013-2020, which decision made clear that the activity of extracting hydrogen from rich gas was not taken into account for the purposes of the allocation. By decision of 25 August 2015, the German authorities confirmed their original decision on the ground, inter alia, that the hydrogen was already present in the rich gas source streams, and it was not the result of a production by Evonik Degussa. Evonik Degussa appealed this decision before the Administrative Court in Berlin. The dispute in the main proceedings concerns whether the production of hydrogen by purification of rich gases ought to have been taken into account for the allocation of allowances. Evonik Degussa claims it should, relying in particular on the wording of the product benchmark for hydrogen and the definition of that product set out in Annex I, Part 2, to Decision 2011/278. 


The Administrative Court, Berlin, referred the question to the Court of Justice whether Annex I, Part 2, to Decision 2011/278 must be interpreted as meaning that a process element which does not produce hydrogen by chemical synthesis, but only isolates hydrogen already contained in a gas mixture, falls within the system boundaries of the product benchmark for hydrogen.


The Court found that Annex I, Part 2, to Decision 2011/278 determining transitional Union-wide rules for harmonized free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council must be interpreted as meaning that a process, such as that at issue here, which does not produce hydrogen by chemical synthesis, but only isolates hydrogen already contained in a gas mixture, does not fall within the system boundaries of the product benchmark for hydrogen. It would be otherwise only if that process: first, is associated with the “production of hydrogen” within the meaning of Annex I to 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 and amending Council Directive 96/61/EC, as amended by Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009; and, second, has a technical connection to the “production of hydrogen.”

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