An advisor to Europe’s top court on Tuesday rejected appeals filed by four German industrial firms over the European Commission’s decision to refuse their request for more free EU carbon allowances.
The appellants had applied to the German government earlier this decade for free EU Allowances for their installations under a “hardship clause” that appears in a 2011 German law.
The clause states that supplementary EUAs should be allocated if the initial permit quota “entails undue hardship for the operator of the installation … provided the European Commission does not reject that allocation.”
“With regard to the application of that clause, the competent German authority found that free allocation of emission allowances on the basis of the Union-wide and fully-harmonised allocation rules alone would entail a risk that the appellants’ economic growth would be blocked,” ECJ Advocate General Paolo Mengozzi wrote in his decision.
Germany in 2012 included the four companies’ installations in its National Implementation Measures (NIMs), a list of facilities for which it was requesting more free allowances in order to shield them from foreign competitors and prevent carbon leakage. Berlin then submitted its NIM to the Commission in 2012.
But the EU’s executive rejected seven facilities on Germany’s list, saying that assigning more free allowances to some installations would distort competition and undermine the harmonised approach to EU-wide CO2 permit allocations.
This led the firms to launch a legal challenge to the Commission’s decision, which in 2014 was initially dismissed by the EU’s lower General Court before the four companies filed an appeal later that year.
“The main question raised in these cases … concerns the scope of the Commission’s power to adopt [NIMs] … to establish harmonised rules for free allocation of allowances for the third trading period,” Mengozzi wrote.
“More specifically, the fundamental question in these appeals is whether or not [EU law] … permitted the Commission to provide for a hardship clause in those [NIMs].”
As part of their appeal, the companies alleged that the EU’s law on free allocations infringes on their fundamental rights.
But Mengozzi dismissed this claim along with their appeals, saying “established case-law shows that protection of the environment is one of the objectives of general interest which may justify limitations of fundamental rights.”
The companies were also ordered to pay any legal costs incurred by the Commission.
A final ruling by the ECJ is due later this year, but history has shown the court typically follows the guidance of its advocate generals.
The four firms were Arctic Paper Mochenwangen GmbH, Metals processing firm DK Recycling und Roheisen GmbH, oil refinery Raffinerie Heide GmbH, and Romonta GmbH, which extracts wax from lignite that is used in shoe polish and vinyl records.
Polish-headquartered Arctic Paper SA late last year announced that it had decided to cease production at its troubled Mochenwangen mill and would try to find a buyer for the facility.
By Mike Szabo – mike@carbon-pulse.com
