Europe: EU Versus its Member States: Who Can Set Emissions Allowances?
Authored by Vanessa C. Edwards (London)
Two recent court judgments concern European Commission decisions relying upon its own data in its review of two national plans identifying and allocating quantities of greenhouse gas emission allowances. Was the Commission simply reviewing the Member States’ actions or was it rather usurping their powers? The result could determine how effective the EU’s efforts to reduce emissions will be.
The European Union and its 27 Member States agreed jointly to fulfill their commitments to reduce anthropogenic greenhouse gas emissions under the Kyoto Protocol. Two recent judgments by the Court of First Instance of the European Communities (renamed the General Court since the Lisbon Treaty came into force on 1 December 2009) illustrate the difficulties faced by the EU in legislating to achieve fulfilment of these commitments. One of the principal legislative instruments used by the EU is the directive, which prescribes the result to be achieved but leaves the choice of form and methods to each Member State. The European Commission has power to review how the Member States implement a directive: the European Courts often have the task of deciding whether the Commission has correctly exercised that power.
Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, aims to contribute to fulfilling the Kyoto Protocol commitments effectively, through an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment. The Directive requires that, for each five-year period, each Member State is to develop a national allocation plan (NAP) stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them. The NAP is to be based on objective and transparent criteria, including those listed in the Directive, and is to be notified to the Commission. The Commission may reject all or part of a NAP on the basis that it is incompatible with the listed criteria, in which case the Member State may not decide on the total quantity of allowances to be allocated for the period concerned or initiate the process for the allocation of those allowances until its proposed amendments are accepted by the Commission.
In 2006 Poland and Estonia notified the Commission of their NAPs for 2008-2012. In 2007 the Commission decided that those NAPs were incompatible with the criteria in the Directive and that the total annual quantities of emission allowances should be reduced by approximately 28% and 48% respectively. Poland and Estonia brought actions for annulment of those decisions, arguing essentially that the Commission had exceeded its powers in rejecting their NAPs. On 23 September 2009 the Court of First Instance annulled the decisions.
In the case of Poland, the General Court ruled that a Member State alone has the power to draw up a NAP and to take final decisions fixing the total quantity and distribution of allowances. The Commission’s power of review is very restricted: it may verify the conformity of a NAP with listed criteria and by reasoned decision reject a NAP which does not so conform. The Commission had accordingly exceeded its power by substituting its own data for those contained in the NAP without any review of the compatibility of the latter with the listed criteria and by imposing a ceiling for the total quantity of allowances.
In the case of Estonia, the General Court ruled that, by rejecting the NAP on the sole basis of doubts as to the reliability of the data used, the Commission erred in law. By adopting that approach, which amounted to taking the view that only the data chosen by itself could be used for the purposes of drawing up a NAP, the Commission disregarded the fact that its task was to review the choices made by the Member State for the purposes of drawing up its NAP rather than to make its own choice as to the data to be used. The Court also found that the Commission had not properly examined the NAP when assessing whether it included a “reserve” of allowances and that it had thereby infringed the principle of sound administration. It is rare for the Court to overturn a Commission decision on this ground.
On 3 December the Commission appealed from the judgments of the General Court to the Court of Justice of the EU, essentially arguing that the General Court was wrong in its assessment of the limited extent of the Commission’s power of review of NAPs. The appeal does not affect the judicial annulment of the decisions, and on 11 December the Commission issued new decisions. The Commission has again rejected Poland’s and Estonia’s NAPs because they violate several of the listed criteria. This time, however, the Commission does not seek to replace the data used with its own data and does not specify the ceiling it considers appropriate.
