Judgments nº T-263/07 of Court of First Instance of the European Communities, September 23, 2009

• Resolution Date: September 23, 2009
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-263/07

In Case T-263/07,

Republic of Estonia, represented by L. Uibo, acting as Agent,

applicant,

supported by

Republic of Lithuania, represented by D. Kriau-i-nas, acting as Agent,

and

Slovak Republic, represented initially by J. -orba, and subsequently by B. Ricziová, acting as Agents,

interveners,

v

Commission of the European Communities, represented by U. Wölker, acting as Agent, assisted by T. Tamme, lawyer,

defendant,

supported by

United Kingdom of Great Britain and Northern Ireland, represented initially by Z. Bryanston-Cross, subsequently by L. Seeboruth, and finally by S. Ossowski, acting as Agents, assisted by J. Maurici, barrister,

intervener,

APPLICATION for the annulment of the Commission Decision of 4 May 2007 concerning the national allocation plan for the allocation of greenhouse gas emission allowances notified by the Republic of Estonia for the period from 2008 to 2012, pursuant 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 (OJ 2003 L 275, p. 32),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Seventh Chamber),

composed of N.J. Forwood (Rapporteur), President, D. -váby and E. Moavero Milanesi, Judges,

Registrar: K. Poche-, Administrator,

having regard to the written procedure and further to the hearing on 11 February 2009,

gives the following

Judgment

Legal context

1 Article 1 of European Parliament and Council Directive 2003/87/EC of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32; -the Directive-), as amended by European Parliament and Council Directive 2004/101/EC of 27 October 2004 (OJ 2004 L 338, p. 18) provides:

-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.-

2 Article 9(1) of the Directive provides:

-For each period referred to in Article 11(1) and (2), each Member State shall develop a national plan stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them. The plan shall be based on objective and transparent criteria, including those listed in Annex III, taking due account of comments from the public. The Commission shall, without prejudice to the Treaty, by 31 December 2003 at the latest develop guidance on the implementation of the criteria listed in Annex III.

For the period referred to in Article 11(1), the plan shall be published and notified to the Commission and to the other Member States by 31 March 2004 at the latest. For subsequent periods, the plan shall be published and notified to the Commission and to the other Member States at least 18 months before the beginning of the relevant period.-

3 Article 9(3) of the Directive reads:

-Within three months of notification of a national allocation plan by a Member State under paragraph 1, the Commission may reject that plan, or any aspect thereof, on the basis that it is incompatible with the criteria listed in Annex III or with Article 10. The Member State shall only take a decision under Article 11(1) or (2) if proposed amendments are accepted by the Commission. Reasons shall be given for any rejection decision by the Commission.-

4 Article 11(2) of the Directive reads:

-For the five-year period beginning 1 January 2008, and for each subsequent five-year period, each Member State shall decide upon the total quantity of allowances it will allocate for that period and initiate the process for the allocation of those allowances to the operator of each installation. This decision shall be taken at least 12 months before the beginning of the relevant period and be based on the Member State-s national allocation plan developed pursuant to Article 9 and in accordance with Article 10, taking due account of comments from the public.-

5 Annex III to the Directive (-Annex III-) sets out 12 criteria applicable to national allocation plans. Criteria Nos 1 to 3, 5 and 6, 10 and 12 of Annex III provide:

-1. The total quantity of allowances to be allocated for the relevant period shall be consistent with the Member State-s obligation to limit its emissions pursuant to [Council Decision 2002/358/EC of 25 April 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder (OJ 2002 L 130, p. 1)] and the Kyoto Protocol, taking into account, on the one hand, the proportion of overall emissions that these allowances represent in comparison with emissions from sources not covered by this Directive and, on the other hand, national energy policies, and should be consistent with the national climate change programme. The total quantity of allowances to be allocated shall not be more than is likely to be needed for the strict application of the criteria of this Annex. Prior to 2008, the quantity shall be consistent with a path towards achieving or over-achieving each Member State-s target under Decision 2002/358 and the Kyoto Protocol.

2. The total quantity of allowances to be allocated shall be consistent with assessments of actual and projected progress towards fulfilling the Member States- contributions to the Community-s commitments made pursuant to [Council Decision 93/389/EEC of 24 June 1993 for a monitoring mechanism of Community CO 2 and other greenhouse gas emissions].

3. Quantities of allowances to be allocated shall be consistent with the potential, including the technological potential, of activities covered by this scheme to reduce emissions. Member States may base their distribution of allowances on average emissions of greenhouse gases by product in each activity and achievable progress in each activity.

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5. The plan shall not discriminate between companies or sectors in such a way as to unduly favour certain undertakings or activities in accordance with the requirements of the Treaty, in particular Articles 87 and 88 thereof.

6. The plan shall contain information on the manner in which new entrants will be able to begin participating in the Community scheme in the Member State concerned.

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10. The plan shall contain a list of the installations covered by this Directive with the quantities of allowances intended to be allocated to each.

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12. The plan shall specify the maximum amount of CERs and ERUs which may be used by operators in the Community scheme as a percentage of the allocation of the allowances to each installation. The percentage shall be consistent with the Member State-s supplementarity obligations under the Kyoto Protocol and decisions adopted pursuant to the UNFCCC or the Kyoto Protocol.-

    Facts and procedure

    6 The Republic of Estonia has notified the Commission of the European Communities of its national greenhouse gas allocation plan, in accordance with the Directive. According to the Republic of Estonia, that notification was given on 30 June 2006, whereas the Commission maintains that it was given on 7 July 2006.

    7 Following an exchange of correspondence with the Commission, the Republic of Estonia submitted a new version of its national greenhouse gas allocation plan in February 2007.

    8 On 4 May 2007, the Commission adopted its decision on the national greenhouse gas allocation plan notified by the Republic of Estonia for the period from 2008 to 2012, in accordance with the Directive (the -contested decision-). That decision calls for a reduction of 47.8% compared with the emission allowances which the Republic of Estonia was proposing to issue.

    9 The operative part of the contested decision reads:

    -Article 1

    The following aspects of the national allocation plan of Estonia for the first five-year period mentioned in Article 11(2) of the Directive are incompatible respectively with:

1. criteria 1, 2 and 3 of Annex III to the Directive: the part of the intended total quantity of allowances, amounting to 11.657987 million tonnes CO 2 equivalent per year, that is not consistent with assessments made pursuant to Decision 280/2004/EC and not consistent with the potential, including the technological potential, of activities to reduce emissions; this part being reduced in respect of emissions of project activities which were already operational in 2005 and resulted in 2005 in emission reductions or limitations in installations falling under the scope of the Directive to the extent that the resulting emission reductions or limitations due to these project activities have been substantiated and verified; in addition, the part of the total quantity potentially amounting to 0.313883 million tonnes of allowances annually in respect of additional emissions of one combustion installation not included in the first phase national allocation plan to the extent that this is not justified in accordance with the general methodologies stated in the national allocation plan and on the basis of substantiated and verified emission figures;

2. criterion 3 of Annex III to the Directive: the non-inclusion in the national allocation plan of a set-aside for allowances drawn up by Estonia pursuant to Article 3(1) and (2) of [Commission Decision 2006/780/EC of 13 November 2006 on avoiding double counting of greenhouse gas emission reductions under the Community emissions trading scheme for project activities under the Kyoto Protocol pursuant to European Parliament and Council Directive 2003/87/EC] in the total quantity of allowances and the absence of a correspondingly lower allocation to installations carrying out the relevant activities;

3. criterion 5 of Annex III to the Directive: the allocations to certain installations beyond their expected needs resulting from...