Chapter VIII
The EU ETS and the European Green Deal – the Struggle for Compromise
p. 165-182
Résumé
The European Union’s (EU) greenhouse gas emissions trading scheme (ETS) is the ‘cornerstone’ and ‘key tool’ of EU climate policy, according to the European Commission (https://climate.ec.europa.eu/policies/ets_en). At the end of 2020, the European Council agreed with the European Commission’s plan to increase the EU’s reduction target from 40 to 55 per cent, and emissions trading is expected to lower the contracting associated with meeting this reduction target. This article points to the dynamic nature of carbon markets and their ever-evolving legal nature, analysing how the original EU ETS Directive – Directive 2003/87 – has been revised over the years. The original EU ETS Directive is short, and it is worth considering the reason for this. The author demonstrates the implementation problems faced by this instrument through years of existence. The EU ETS encounters three key regulatory trade-offs, i.e.: climate ambition vs. international competitiveness; structural reform vs. cost-effectiveness; maintaining legislative simplicity vs. achieving multiple objectives. Therefore, in the closing part of the text, the author will reflect on the future (r)evolution of the carbon regime envisaged in the European Green Deal.
Texte intégral
I. Introduction
1Climate change defined as ‘a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods’1 and global warming are indisputable. Presented in December 2019, the European Green Deal2 has become the European Union’s major reference point for mitigating climate change and strategy to achieve EU climate neutrality by 2050. The strategy has achieved important milestones in its three years of existence.
2This set of initiatives took the Paris Agreement3 as a starting point, and set an ambitious target: to reduce greenhouse gas emissions by 55 per cent by 2030 (compared to 1990). The Framework Convention on Climate Change defines emissions as ‘the release of greenhouse gases and/or their precursors into the atmosphere over a specified area and period of time’.4 In addition, the Framework Convention on Climate Change defines greenhouse gases as ‘those gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared radiation’.5
3The legislative package of measures to achieve the target mentioned above has been called ‘Fit for 55’,6 and supported by the large financial injection of Next Generation EU funds7 for the economies of the EU-27. An ambitious roadmap has been undertaken to achieve climate neutrality by 2050.
4By December 2022, the European Green Deal achieved two new goals: approving the Social Climate Fund for a fair transition to climate neutrality, and extending the application of emissions trading to new sectors,8 which will be discussed later in this article.
5The concept of emissions trading begins with an emissions target for certain companies. E. Woerdman explains the process as follows:
[A] target puts a collective limit on their emissions. Each emitter is allocated a small piece of this collective limit, in the form of emission rights called ‘allowances’. In the case of climate change, each allowance gives the holder the right, during a specifies period, to emit one tonne of CO2 (or, in case of the other greenhouse gases, one tonne of CO2-equivalent). The limited number of allowances defines the emissions cap of the emitter. The number of allowances decreases every year to reduce emissions. Emitters either get the allowances free from the government or have to buy them at auction.9
6As previously mentioned, the pillar of European climate policy is the European Emissions Trading Scheme (EU ETS), which is the most extensive and longest-lived ‘cap and trade’ design variant of an emissions trading mechanism in the world.10 ‘Cap-and-trade’ refers to the trading of emission entitlements under an emissions cap. A cap-and-trade system imposes a cap on the annual emissions of a group of emitters, such as companies, for a certain period of time.11 The cap guarantees that total emissions are kept to a pre-defined level (and do not rise above it – in the period for which the cap is applicable). Covered installations must submit an EUA for each tonne of carbon dioxide equivalent (CO2 eq)12 they emitted during one year. EUAs are allocated free of charge, or they are auctioned. The trading system offers flexibility to the businesses covered by the scheme, as it can decide on taking action or buying EUAs depending on the EUA price. Emitters whose reduction costs are lower than the price are encouraged to take action. Emitters with high reduction costs can buy EUAs and postpone their own action thereby complying with the GHG policy more cheaply than they otherwise would have been able to (if, for example, all emitters needed to cut emissions by the same ratio).13
7The current EU ETS regulations continue to raise a number of interpretative questions, which are most often revealed at the application stage of these regulations in specific cases. The views of the jurisprudence and various studies created by the doctrine and public administration bodies on the elementary concepts on which the EU ETS regulations are based, are a testimony to the challenge of creating substantive administrative law standards, which are expected to be both precise and effective in resolving specific issues of importance to society and the economy.14 This task is made even more difficult when the provisions in question constitute part of an extensive system of regulations, addressing such a complex and multi-faceted area as climate law. The following section hereof will analyse why the original EU ETS Directive – Directive 2003/8715 – was short, and how it has been revised over the years.
II. The EU ETS Evolution
8The origins of the EU ETS can be traced back to 1992, when 180 countries agreed to avoid a dangerous level of manmade global warming, and signed the United Nations Framework Convention on Climate Change (UNFCCC).16 As a means of specifying action to be taken as part of this global joint effort, the Kyoto Protocol (KP)17 was consequently agreed upon in 1997. This Protocol introduced two principles essential for the establishment of the EU ETS: it contained absolute quantitative emission targets for industrialised countries, and included a set of so-called ‘flexible mechanisms’, which allowed for the option to exchange emission units between countries as an International Emissions Trading system.18
9The EU ETS was instituted ‘to contribute to fulfilling the [Kyoto Protocol] commitments of the European [Union] and its Member States more effectively, through an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment’,19 and aims at promoting ‘reductions of greenhouse gas emissions in a cost-effective and economically efficient manner’.20
10The EU ETS has evolved with the development of European climate change law.21 It is now regulated by more than twenty acts of secondary legislation, including in particular:
- Directive 2003/87/EC of the European Parliament and of the Council of 13 October 200322 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Directive 96/61, OJ 2003 L 275/32
- Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008 amending Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community23
- Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community24
- Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814.25
11The first Directive is very short and written in fairly straightforward language. In the case of Arcelor Atlantique and Lorraine,26 CJEU stated that:
12[The EU ETS] is a novel and complex scheme whose implementation and functioning
could have been disturbed by the involvement of too great a number of participants. In view of the novelty and complexity of the scheme, … the step-by-step approach taken, based in particular on the experience gained during the first stage of its implementation, in order not to disturb the establishment of the system were within the discretion enjoyed by the Community legislature.27
13The above indicates that the basic premise of the directive introducing the EU ETS was transparency and an ‘open’ nature. The 2004 report states that:
The allocations set out in the National Allocation Plans (NAPs) were generally
considered to be undemanding in terms of numerical targets. It is evident that all countries position the first phase of the introduction of the EU ETS as a “practice period for the trading scheme”. The first EU ETS Directive provides for the market to be linked to other countries’ national emissions trading systems and indicates that the market will expand to countries outside the EU.28
14The main goal was to test price formation in the carbon market and to establish the necessary infrastructure for the monitoring, reporting and verification of emissions.29 The cap was largely based on estimates as there was no reliable emission data available.
15The expansion of the EU ETS has been divided into trading periods (or phases), four of which have already been decided and more may follow:30 Phase I, from 2005 to 2007; phase II, from 2008 to 2012; phase III, from 2013 to 2020; phase IV, from 2021. The first two phases were governed by Directive 2003/87; an important revision for phase III was carried out with Directive 2009/29. An analysis of the ETS regulatory evolution with regard to cap-setting, allowance allocation and monitoring and verification procedures is necessary for a broader understanding of the scheme.31
16In the first two trading phases, every State decided on how many allowances to allocate, as well as on their distribution to the relevant operators through National Allocation Plans (NAPs), which were reviewed by the Commission, and could be rejected for failure to comply with the requirements included in the Directive.32 As regards the allocation method, in the first two phases most allowances were allocated for free on the basis of historical GHG emission levels (‘grandfathering’).33 The compatibility of this system with the ‘polluter pays principle’ has been questioned.34
17The third phase of the EU ETS was shaped by the lessons learnt from the previous two phases. In particular, significant efforts were taken to improve the harmonisation of the scheme across the EU following a review of the EU ETS, agreed upon in 2008.35
18As successive phases of the European Trade Scheme were introduced, significant implementation problems arose as a result of the process of introducing directives into the national orders of EU Member States. Implementation can be seen as a process consisting of two stages. The first stage is the legal implementation of the policy and its transposition into law, and the second stage is practical implementation in the meaning of the practical application of the law. Legal implementation is a prerequisite for practical implementation.36 Member States have been granted a certain degree of discretion in the implementation of the EU ETS, leaving room for manoeuvre in the form and manner of implementation.37
19E. Woerdman identified four essential problems the EU ETS encountered during its implementation.38 First, MS over-allocated allowances to protect the competitiveness of their industries. This, in combination with the financial crisis in 2008, has led to a sharp fall in allowance prices. Low allowance prices give few incentives to invest in energy-efficient technologies.39 As the court mentioned:’[The EU]… must enable a situation to be avoided in which surpluses of allowances build up, thereby risking a “collapse in the market” as happened during the trading period from 2005 to 2007’.40
20Second, operators received so-called windfall profits by passing on costs of allowances, equivalent to market prices, to consumers,41 a phenomenon concerning mainly the electricity-producing sector, which is able to ‘integrate the value of used emission allowances which were allocated free of charge into the price of electricity’.42 In other words, a windfall profit is defined as ‘accruing to thermal power generation if the additional revenue earned from the pass-through of CO2 (opportunity) costs to power prices exceeds the level of compliance costs incurred under that scheme by thermal generators’.43
21Third, Woerdman criticises the free allocation of allowances to new entrants and extensions, as well as the need for operators to surrender allowances for closing plants.44 This leads to companies keeping energy-inefficient plants in place in order to continue receiving allowances, even if production costs outweigh profits. Fourth, many operators committed tax fraud and allowance theft from the MS, which has led to losses of approx. 5 billion euros in Europe.45
22In the case of enforcement, the CJEU highlighted that:
The European Union legislature must be allowed a broader discretion when it is asked
to intervene in an area which entails politics, economic and social choices on its part, and in which it is called upon to undertake complex assessments. In its judicial review of the exercise of such powers, the Court cannot substitute its own assessment for that of the European Union legislature.46
23In such context Bogojević has emphasised how the EU judges have approached the EU ETS as a ‘matter of constitutional law’ in the sense that EU climate change litigation ‘is concerned with questions, such as competence allocation, subsidiarity and ensuring effective judicial protection, demonstrating that the EU courts remain within a settled constitutional law framework in giving meaning to and interpreting EU climate change law’.47 This is highly significant as a starting point for the next section of the article, which will discuss the relationship between the EU ETS and the European Green Deal strategy.
III. EU ETS and EGD
24The EU ETS is the key instrument for reducing greenhouse gases in the EU, and the most important element in the implementation of the EU’s climate policy. Ever since it was reformed between 2015 and 2018, the price of emission allowances gradually began to rise, providing plant operators with the right market signals. The significant increase in the carbon price taking place in 2018 was one of the main reasons for its reduction in the European Union.
25The EU Emissions Trading Scheme is one of the sources of funding for the fair transition referred to in the European Green Deal. The ‘Just Transition Mechanism’ (MST)48 itself is part of the ‘Investment Plan for a Sustainable Europe’49 and the ‘InvestEU’50 programme. One of the elements of the Fair Transition Mechanism is the Fair Transition Fund.51 The aim is to reduce the negative effects of climate transition by providing support to the territories most affected by the transition. For the period of 2021 2027, specific Fair Transition targets have also been set:
a more environmentally friendly low-carbon Europe by improving education and training systems necessary for the adaptation of skills and qualifications, upgrading the skills of all, including the workforce, and creating new jobs in sectors related to the environment, climate, energy, the circular economy and the bioeconomy.52
26The new Directive 2018/410 adopted on 14 March 2018, on the EU ETS, the amended Directive 2003/87/EC, to strengthen cost-effective emission reductions and low-carbon investments, as well as Decision (EU) 2015/1814. Following the implementation of this new EU ETS Directive, revenues from the auctioning of CO2 allowances, which were estimated at €25 billion at the end of 2020, will be made available to cover the transition to a low-carbon economy using two funds that are not part of the European Union’s multi-annual budget: The European Innovation Fund53 and the European Modernisation Fund.54 These funds can be used to supplement the financing of investment projects covered by the EU’s multiannual budget. The aim of the innovation fund is to create financial incentives for companies and public authorities to invest in the next generation of low-carbon technologies. The European Modernisation Fund is formally linked to a fair transition, as support under this fund can be given to fair transition projects, whereas in the case of the Innovation Fund, no formal link has been established, but the fund can indirectly contribute to the training of workers who have lost their jobs in declining high-carbon sectors, and need to seek employment in new low-carbon sectors of the economy.55
27Moreover, in this context, the relation between the European Trade Scheme and the European Green Deal has been very clearly brought out by the Communication entitled ‘Europe’s Moment: Repair and Prepare for the Next Generation’.56 To live up to the extraordinary challenge and prepare a better future, the Commission is proposing a new recovery instrument, called ‘Next Generation EU’, within a revamped long-term EU budget. In total, this European Recovery Plan will invest €1.85 trillion to help kick-start the economy, and ensure that Europe bounces forward.
28To help do this in a fair and shared way, the Commission will propose a number of new own resources. These could include a new own resource based on the Emissions Trading Scheme, a Carbon Border Adjustment Mechanism and an own resource based on the operation of large companies.57
29To summarise, the Commission used the EU ETS as an instrument to fund the recovery plan ‘from economy to climate neutrality’.
30The implementation problems of the EU ETS Directives previously mentioned are also represented in the struggle for compromise between the European Green Deal and the European Trade Scheme. Woerdman described these trades-off as:
climate ambition versus international competitiveness: a more stringent EU emissions cap could weaken the competitiveness of internationally operating industries; structural reform versus cost-effectiveness: preventing allowance oversupply stimulates low-carbon technologies but could also undermine the cost-effectiveness of the EU ETS; keeping it simple versus meeting multiple goals: actors prefer a simple EU ETS but also want it to stimulate law-carbon technology, protect competitiveness, prevent carbon leakage and improve solidarity, which increases complexity.58
31In addition, achieving the targets set out in the European Green Deal requires the rapid replacement of fossil energy with carbon-free, low-emission alternatives, as well as the rapid reduction of emissions from production processes associated with commodities, such as iron, steel, aluminium, cement, and chemicals, which are difficult to decarbonise. These mitigation actions can increase production costs in an internationally competitive commodity sector – and the more ambitious and rapid the action, the greater the cost increase can be. For countries with high level mitigation ambitions, rising production costs may force economically sensitive industries to move to countries with less ambitious emissions targets.
32This process, referred to as ‘leakage’, i.e. companies transferring production and emissions to other jurisdictions, needs to be analysed in more depth within the context of the correlation of the EU ETS and EGD. The purpose of the European Green Deal was to initiate the adoption of new regulations, as well as to recast existing ones. Carbon pricing has been identified as a key strategy in this regard, which includes not only the revision of the EU ETS Directive, but also the adoption of CBAM, among others. As F. Vanrykel explains:
CBAMs are hard to define in the abstract; this name hides a mechanism to be linked to several objectives. The traditional objective attributed to CBAMs is to prevent carbon leakage, that is the displacement of emissions resulting from a firm’s relocation. CBAMs are often depicted as an “equalisation system”; they do not exist on their own but need to be grafted on to carbon pricing mechanisms (e.g. a carbon tax or an ETS). With CBAMs, a carbon price is imposed on GHG emissions embedded in products, when they enter the territory (import). Under certain designs, exported products are not subject to the carbon price. There is thus an intrinsic cross-border dimension with CBAMs; the carbon price is imposed or lifted when a border is crossed.59
33It is also worth acknowledging that CBAMs should not be equated with a carbon tax, as the latter does not apply when a carbon price is imposed on GHG emissions embedded in products when they enter the territory.60
34The proposed CBAM is a tariff on high-carbon goods imported from abroad. It is applied as an import tax paid by the importer when these products enter the European Union, specifically through the purchase of certificates representing the emissions embedded in the goods. The cost of the certificates will be based on the price of carbon in the EU ETS. By assigning such a carbon price to imports, the CBAM aims to level the playing field by taxing foreign production with less restrictive emissions regulations and reducing the risk of leakage.
35The EU-CBAM is intended to replace the need for free allowances granted to installations at risk of carbon leakage in the EU-ETS. However, the scope of the EU-CBAM does not fully cover this list;61 it covers a limited list of products, including cement, electricity, fertilisers, iron, steel, and aluminium. The EU-CBAM has been designed with a cautious and gradual approach, similar to the one adopted for the EU-ETS, and in accordance with the ‘autonomy’ principle. According to the recitals, the CBAM’s ultimate goal is to cover a wide range of products, but initially, it is advisable to focus on several sectors with similar products that are at risk of carbon leakage. The selection of products is based on their greenhouse gas emissions levels, the risk of carbon leakage in the EU ETS sectors, and the objective to reduce complexity and administrative burden. These criteria align with both the principles of ‘economic efficiency’ and ‘free market and fair competition’.62
36It is worth noting that compliance of this mechanism with the UNFCCC is questionable. As Alice Pirlot notes, ‘The systematic and indiscriminate use of CBAMs to mitigate carbon leakage risks’, as in the case of the EU-CBAM, ‘is not “in line” with the principle of common but differentiated responsibility that underlies the Paris Agreement’.63
37As the EU ETS is the key climate policy to drive the decarbonisation of the EU electricity system and the EU heavy industry sector, such a restriction will have substantial implications for utilities across Europe, fundamentally influencing investment in new technologies. The connected struggle is the growing concern about the acceptability of carbon prices and how to tackle this issue in view of climate neutrality. The regulations should respond to this by concentrating more on renewable energy efficiency.
38Furthermore, it may be concluded from the Court’s case law analysed that it is not only the doctrine that has drawn attention to the need to build a compromise between the economic and climatic aspects that the EU ETS entails. For example, in the joint cases C-565/14P Romonta:
The applicant claims that the Commission did not correctly assess or balance climate protection and its economic ruin. The Commission took the view that its court-ordered liquidation is a positive measure with a view to better climate protection. According to the applicant, the Commission ignored the fact that improved climate protection was not ensured in this case because of the risk of emissions being displaced outside the Union. In addition, the Commission failed to have regard to the serious consequences for it, its employees and its customers, if it ceased operating. According to the applicant the Commission wrongly held that climate protection took precedence over safeguarding a large number of jobs.64
39At the time of writing, the European Union has outlined a balance between the long-term goals of the European Green Deal, economic efficiency, and the use of the EU ETS as the main mechanism reducing greenhouse gas emissions by consolidating and expanding emissions trading and creating a Social Climate Fund to help the transition.
40The new actions assume:
- Reducing emissions from sectors subject to the EU ETS by 62 per cent between now and 2030 compared to 2005. Up to now the reduction was 43 per cent, which is a significant increase.
- Intensifying the pace of annual CO2 emission reductions from 2.2 to 4.4 per cent per year from 2028.
- Phasing out free allowances for certain companies and the Carbon Border Adjustment Mechanism (CBAM) between 2026 and 2034.
- Including emissions from shipping in this scheme, which will make the EU the first territory to apply an explicit carbon price to emissions from the maritime sector.
- Introducing a new, separate emissions trading scheme for fuel use in road transport from 2027.65
41These are simply a few examples of the EU’s climate neutrality actions. The ’Fit for 55’ package also includes a proposal to amend the EU ETS rules for aviation,66 as well as a proposal to amend the Renewable Energy Directive. As the development of alternative propulsion and aircraft technologies (e.g. electric aircraft) is not yet advanced enough to be available for commercial operations in the next decade, sustainable aviation fuels are considered to have the greatest potential for reducing emissions in the short term. To promote the launching of production and use of such fuels in aviation, the Commission has presented the ReFuelEU Aviation initiative on sustainable air transport.67 The proposed new rules oblige fuel suppliers to provide an increasing share of sustainable aviation fuels as part of the fuel delivered at EU airports. The proposal also seeks to address the refuelling practice of accepting more fuel than is required to operate a flight safely at airports where it is cheaper. While the idea of ReFuelEU is admirable, its practical aspects need to be further developed. As airline representatives have raised, refuelling obligations should reflect the challenges pilots face, such as operational constraints, airspace closures, and weather conditions. They do not support a provision whereby airports would be responsible for providing the infrastructure to deliver, store and lift SAF. According to airport representatives, many airport managers are neither owners nor operators of the fuel delivery infrastructure on their premises, so the regulation should reflect the differing responsibilities in this regard.68
42These new proposals address some of the problems that the EU faces in achieving climate neutrality, but some are still silent, such as addressing political concerns about the affordability of the energy transition, especially in light of the current crisis and corelated policy interventions. The new policy proposals of the Council and Parliament do not seem to fully address structural issues that would increase price predictability and resilience to shocks in the EU ETS market.
43These were only examples of struggle for compromise between the EU ETS and the European Green Deal. In the next section the author will reflect on the future (r)evolution of the carbon regime in the context of climate neutrality.
IV. Conclusion
44Based on the text presented above, the following questions need to be asked about the future (r)evolution of the carbon regime envisaged in the European Green Deal. Should the EU tighten its climate change mitigation rules by extending the EU ETS to more sectors of the industry, and by limiting the impact of the renewable energy and energy efficiency directives, or would this significantly increase complexity and decrease the EU’s energy security? If there is a tightening of mitigation rules, would all Member States be forced to impose national carbon taxes on sectors regulated by the EU ETS? If only the most economically advanced members of the Union were obliged to do so, would this undermine coherence and solidarity within EU climate law? Furthermore, in an international context, it is worth considering whether the European Trade Scheme will be linked to other emissions trading schemes in industrialised countries, and what would then happen to the fee contained in the European Green Deal, related to reducing the risk of emissions leakage, i.e. the Carbon Border Adjustment Mechanism? Some of these questions are reflected in current European Union initiatives or proposals.
45At the same time, it should be pointed out that the number of those initiatives creates a certain type of legislative ‘accumulation’, and brings to mind the issue of the practical aspects of the functioning of the initiative in the legal field. If the European Union’s ambition in terms of climate neutrality is to effectively reduce greenhouse gas emissions, then the system should be rethought in the light of its limitations in ensuring a more common and consistent approach in legislation. For example, the EU ETS does not take into account the fact that some countries in Eastern Europe still base their economies on fossil fuels. As a result, the scheme may contribute to inequality and lack of solidarity between Member States.
46Achieving the above aims is not straightforward, as meeting one target may come at the sacrifice of reaching another. The EU ETS implementation problems described above, which were associated with the introduction of new phases, were mostly solved by the addition of further legal provisions and rulings of the European Court of Justice. By December 2022, the European Green Deal had achieved two new goals: approving the Social Climate Fund for a fair transition to climate neutrality, and extending the application of emissions trading to new sectors. And important new features in its operation have just been approved, such as: reducing emissions from sectors subject to the EU ETS by 62 per cent between now and 2030 as compared to the year 2005. Up to now the reduction has been 43 per cent, so this is a significant increase, intensifying the pace of annual CO2 emission reductions from 2.2 to 4.4 per cent per year from 2028, phasing out free allowances for certain companies and the Carbon Border Adjustment Mechanism between 2026 and 2034, including emissions from shipping in this scheme, which will make the EU the first territory to apply an explicit carbon price to emissions from the maritime sector, and a new, separate emissions trading scheme for fuel use in road transport from 2027. One should approach the EU’s positive assurances about the effectiveness of the initiatives presented above with a certain degree of caution. For example, it should be pointed out that, in theory, the CBAM aims to replace the need for free allowances granted to installations at risk of carbon leakage under the EU-ETS system. However, the scope of the CBAM does not fully cover this list; it only covers a limited list of products, including cement, electricity, fertilisers, iron, steel, and aluminium. This leads to the conclusion that the EU-ETS’s mechanism alone may not be sufficient to achieve all of the EU’s climate goals. Additional measures, such as regulations, subsidies, and green taxes will be necessary to provide stronger and more effective support for investment in sustainable energy and emissions reduction.
47In conclusion, it should be pointed out that the actions undertaken by the European Union to achieve climate neutrality through the European Trade Scheme, as the most important instrument to reduce greenhouse gas emissions, are a set of trade-offs between climate ambition and economic efficiency. The Commission’s recent actions imply that the 2030 reduction target is likely to be achieved in spite of the difficulties associated with the pandemic and the political situation in the region. The future evolution of the carbon trading scheme is taking place now, and it is not slowing down. Certainly, the European Union will have to work out many more compromises to make the EU-ETS its best version in terms of climate neutrality. Nevertheless, there is every indication that these changes will be undertaken.
Notes de bas de page
1 Art. 1 of The United Nations Framework Convention on Climate Change (New York, 9 May 1992).
2 Commission, ‘The European Green Deal’ (Communication) COM(2019) 640 final.
3 Paris Agreement, Paris, 12 December 2015: https://unfccc.int/sites/default/files/english_paris_agreement.pdf.
4 The United Nations Framework Convention on Climate Change (n 2 above), Art. 1.
5 Ibid.
6 Commission, ‘“Fit for 55”: delivering the EU’s 2030 Climate Target on the way to climate neutrality’ (Communication) COM(2021) 550 final.
7 Commission, ‘Europe’s moment: Repair and Prepare for the Next Generation’(Communication) COM(2020) 456 final.
9 E. Woerdman, M. Roggenkamp and M. Holwerda, Essential EU Climate Law 2nd edn (Cheltenham, Edward Elgar Publishing, 2021) 45–46.
10 M. Tomasik, ‘Kwalifikacja instalacji w systemie handlu uprawnieniami do emisji w prawie Unii Europejskiej i prawie polskim 115’ in C. Mik and A. Borek (eds), Zmiany klimatu w świetle prawa Unii Europejskiej i prawa polskiego na tle porównawczym (Warszawa, Wydawnictwo IOŚ-PIB, 2021).
11 E. Woerdman, M. Roggenkamp and M. Holwerda, Essential EU Climate Law (n 10 above), 49.
12 Art. 3 of 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.
13 M. Tomasik, ‘Kwalifikacja instalacji’ (n 11 above).
14 Ibid.
15 Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC [2003] OJ L 275/32.
16 The United Nations Framework Convention on Climate Change (n 2 above).
17 The Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto, 11 December 1997).
18 See e.g: M. Skou Anderson and P. Ekins, Carbon-Energy Taxation: Lessons from Europe (Oxford, Oxford University Press, 2009).
19 Preamble, para 5 of Directive 2003/87 (n 16 above).
20 Ibid., Art. 1.
21 See eg: Ch. Flachsland, M. Pahle, D. Burtraw, O. Edenhofer, M. Elkerbout, C. Fischer, O. Tietjen and L. Zetterberg, ‘How to avoid history repeating itself: the case for an EU Emissions Trading System (EU ETS) price floor revisited’ (2020) Climate Policy 133–42.
26 Case C-127/07, Arcelor Atlantique and Lorraine and Others, ECLI:EU:C:2008:292.
28 Outline of the EU Emissions Trading Scheme and Analysis Introduction of the Impact of Its Introduction, November 2004, The Institute of Energy Economics, Japan: https://eneken.ieej.or.jp/en/data/pdf/268.pdf.
29 The European Commission, EU ETS Handbook 7: www.sallan.org/pdf-docs/ets_handbook_en.pdf.
31 See: S. Bogojević, ‘The EU ETS Directive Revised: Yet Another Stepping Stone’ in Environmental Law Review, 2009, 279 et seq. An in-depth overview of the EU ETS is outside the scope of the present contribution. For a more comprehensive analysis, see eg: M. Pohlmann, ‘The European Union Emissions Trading Scheme’ in D. Freestone, C. Streck (eds), Legal Aspects of Carbon Trading 339–65; A. D. Ellerman, F. J. Convery and C. de Perthuis, Pricing Carbon: The European Union Emissions Trading Scheme (Cambridge, Cambridge University Press, 2010).
32 www.europeanpapers.eu/es/europeanforum/theory-and-practice-emissions-trading-european-union-allowance-allocation#_ftn30.
33 https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/development-eu-ets-2005-2020_en.
34 J. Nash, ‘Too Much Market? Conflict Between Tradable Pollution Allowances and the “Polluter Pays” Principle’ (2000) Harvard Environmental Law Review 505.
36 A. Zhelyazkova, C. Kaya and R. Schrama ‘Decoupling practical and legal compliance: Analysis of member states’ implementation of EU policy’ (2016) 55(4) European Journal of Political Research 827–46.
38 See eg: J. B. Skjærseth and J. Wettestad, ‘Implementing EU emissions trading: success or failure?’ (2008) 8(3) Int Environ Agreements, 275–90.
39 E. Woerdman, M. Roggenkamp and M. Holwerda, Essential EU Climate Law (n 10 above) 63–64.
40 Judgment of the Court of First Instance (Second Chamber) of 23 September 2009, T-183/07 Republic of Poland v Commission of the European Communities, ECLI:EU:T:2009:350, para 64.
41 E. Woerdman, M. Roggenkamp and M. Holwerda, Essential EU Climate Law (n 10 above) 65–66.
42 Opinion of Advocate General Kokott in joined cases C-566/11, C-567/11, C-580/11, C-591/11, C-620/11 and C-640/11, Iberdrola, SA and Others v Administración del Estado, ECLI:EU:C:2013:191, para 2.
43 EU ETS Phase II – The potential and scale of windfall profits in the power sector, 8: wwfeu.awsassets.panda.org/downloads/point_carbon_wwf_windfall_profits_mar08_final_report_1.pdf.
44 E. Woerdman, M. Roggenkamp and M. Holwerda, Essential Eu Climate Law (n 10 above) 66–68.
45 Ibid., 71–72.
46 Case C‑203/12, Billerud Karlsborg AB and Billerud Skärblacka AB v Naturvårdsverket, ECLI:EU:C:2013:664.
47 S. Bogojević, ‘EU Climate Change Litigation: All Quiet on the Luxembourgian Front?’ in G. van Calster, W. Vandenberghe and L. Reins (eds), Research Handbook on Climate Mitigation Law (Cheltenham/Northampton, Edward Elgar, 2015) 559.
48 Commission, Proposal for a Regulation of European Parliament and of the establishing the Just Transition Fund COM/2020/22 final.
49 Commission, ‘Sustainable Europe Investment Plan European Green Deal Investment Plan’ (Communication) COM(2020)21 final.
50 Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the InvestEU Programme and amending Regulation (EU) 2015/1017, PE/74/2020/REV/1.
51 See eg: S. Sarkki, A. Ludvig, M. Nijnik et al., ‘Embracing policy paradoxes: EU’s Just Transition Fund and the aim “to leave no one behind”’ (2022) Int Environ Agreements 761–92.
52 Art. 4 of Regulation (EU) 2021/1056 of the European Parliament and the Council of 24 June 2021 establishing the Just Transition Fund, PE/5/2021/REV/1.
53 Commission Delegated Regulation (EU) 2019/856 of 26 February 2019 supplementing Directive 2003/87/EC of the European Parliament and of the Council with regard to the operation of the Innovation Fund C/2019/1492.
54 The Commission Implementing Regulation (EU) 2020/1001 of 9 July 2020, laying down detailed rules for the application of Directive 2003/87/EC of the European Parliament and of the Council as regards the operation of the Modernisation Fund supporting investments to modernise the energy systems and to improve energy efficiency of certain Member States C/2020/4541.
55 See eg: R. Jeszke and S. Lizak, ‘Reflections on the Mechanisms to Protect Against Formation of Price Bubble in the EU ETS Market’ (2021) 32(2) Environmental Protection and Natural Resources 8–17.
56 Commission, ‘Europe’s moment: Repair and Prepare for the Next Generation’ (Communication) COM(2020) 456 final.
57 Ibid.
58 E. Woerdman, M. Roggenkamp and M. Holwerda, Essential EU Climate Law (n 10 above) 44.
59 F. Vanrykel, The illusive simplicity and straightforwardness of carbon taxes: a legal analysis (PhD thesis, University of Liège, 2022) 22–23.
60 See eg: G. Zachmann and B. McWilliams, ‘A European carbon border tax: much pain, little gain’ (2020) 5 Policy Contribution.
61 Annex I of the Proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism COM(2021) 564 final.
62 Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism (2023) OJ L 130/52.
63 A. Pirlot, ‘Carbon Border Adjustment Measures: A Straightforward Multi-Purpose Climate Change Instrument?’ (2021) 9 Journal of Environmental Law.
64 Case C-551/14 P Arctic Paper Mochenwangen v Commission, ECLI:EU:C:2016:684; Case C-564/14 P Raffinerie Heide GmbH v Commission ECLI:EU:C:2016:685; Case C-565/14 P Romonta v Commission, ECLI:EU:C:2016:698, para 78.
66 See an EPRS briefing on the proposal for more details.
67 Commission, Proposal for a Regulation of the European Parliament and of the Council on ensuring a level playing field for sustainable air transport COM(2021) 561 final.
68 Ibid.
Auteur
PhD student, University of Silesia, Poland
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