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Scheme for greenhouse gas emission allowance trading

Decision by the Court of First Instance dated 23 September 2009 re. T‑183/07 Poland v the Commission of the European Communities and re T‑263/07 Estonia v the Commission of the European Communities

The Court of First Instance stated in the decisions referred to above that the European Commission has no right to order Member States on the amount of greenhouse gas emission allowances that they may issue in a given period. The Commission is therefore afraid of the verdict having a substantially adverse impact on the EU strategy for combating climate changes.

Both disputes fall within the area subject to the Directive of the European Parliament and of the Council 2003/87/ES of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC. The scheme is aimed at substantial reduction of greenhouse gas emissions in order to, without limitation, help Member States comply with their obligation under the Kyoto Protocol. The Directive requires Member States to draft the so-called National Allocation Plan (NAP) defining the total amount of emission allowances they intend to issue for the given period and the method of allocating them to the polluters, all of the above under the clearly predetermined objective criteria set forth in schedules to the Directive. Each Member State is obliged to disclose the plan and to notify the other Members States and the European Commission of their plan. The European Commission shall then decide whether these NAPs comply with the predetermined criteria.

Both the Republic of Estonia and the Republic of Poland sued the European Commission on ground the Commission’s decisions on their respective NAPs were invalid. The Commission stated in respect of both countries that the presented NAPs failed to respect the criteria predetermined by the Directive and indirectly imposed on both Estonia and Poland the duty to reduce the number of greenhouse gas emission allowances for 2008 through 2012 by a certain percentages.

The Court sharply dismissed the Commission’s procedure and referred to the fact that the European Commission does not have the power to determine a particular amount of the allowances be issued by a particular country. The Commission may merely review the National Allowance Plans compliance with the objectively predetermined criteria and, if the Plan fails to comply, dismiss the Plan by its decision. If the Commission has any objections against the Plan it cannot simply remove the data therein and replace them by other data acquired by its own method of assessment. The Commission thus interfered with the exclusive powers that the Directive entrusts to individual Member States and which gives them a certain room for deciding which method they choose to draft their NAPs.

The Court of First Instance therefore dismissed the decision by the European Commission on the National Allocation Plans of the said Member States.

The Commission filed appeals in both cases since it believes that the CFI assessed its powers when assessing the NAP too narrowly. The court further failed to sufficiently consider the principal objective of the allowance trading, which is the reduction of greenhouse gas emissions, and the need to ensure the equal treatment of all Member States.

The appeals do not suspend the execution of the CFI rulings. For this reason, new Commission decisions on the originally submitted NAPs are in preparation and will replace the annulled decisions. At the same time, the Commission points out that grounds can hardly be found to justify why the total amount of allowances in the assessed NAPs should differ from the verified data of the plan for the previous period.

In addition to other East-European countries, the Czech Republic filed a similar lawsuit against the European Commission since the Commission also reduced the amount of the allowances for the Czechs by approximately 15%. No verdict has yet been made.

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