“Preparatory work” concept casts numerous doubts. Will current legislative efforts at national level manage the situation to be cleared up?
According to the Communication from the Commission, Guidance document on the optional application of Article 10c of Directive 2003/87/EC (2011/C 99/03, OJ C 99, 31.3.2011, p. 9) an investment process should be considered physically initiated no later than 31 December 2008 if it can be demonstrated that the investment decision was not influenced by the option of receiving free allocation of emission allowances.
The above-stated thesis can be proved, pursuant to the said guidance document, by Member States wishing to make use of free allowances covered by Article 10c of the Directive 2003/87 with four general categories of factual arguments.
First of all Member States could provide substantiated evidence that:
1) construction work has physically started on-site and was visible by 31 December 2008; or
2) a contract for the construction of the power plant in question was signed before 31 December 2008 between an investor (often the operator of the plant) and a
company that is in charge of the construction work.
If the above-mentioned two approaches are not feasible in the concrete factual circumstances the matter becomes more complicated, and requires to have recourse to the concept of “preparatory work” forming third approach. In that regard the Commission in the cited guidance document remarked, ‘The Commission understands that, in the given context, construction work that has physically started could also encompass preparatory work for the construction of the power plant in question, but would always be undertaken on the basis of an explicit approval, if necessary, of the relevant national authority. Member States should submit such relevant authorisation document, which should be of substantive legal status issued in accordance with national or Union law. In the absence of a requirement for an explicit approval for preparatory work, other evidence would be necessary to establish that construction work had been physically started’.
The fourth method of argumentation is extensive and currently unspecified because Commission reserved that ‘The above list should not be considered exhaustive, as Member States may have other means to provide documentary evidence that a certain investment decision was not influenced by the option of receiving free allocation of emission allowances’.
Assuming that the methods 1) and 2) are rather unambiguous and the fourth approach is an open matter to be only conceived, it would be reasonable to go further into particulars of “preparatory work” concept.
The new draft of Polish law on the greenhouse gas emission allowance trading scheme (substituting the earlier Law of 22 December 2004) provides for the possibility for acceleration of the authorisation procedure for the granting of the greenhouse gas emissions permits.
In effect, an operator undertaking to realize combustion installation for the production of electricity may be granted the greenhouse gas emissions permits, and the “undertaking to realize” installation takes place on the day on which the investment process relating to this installation was physically initiated. The said Law further specifies that “the day on which investment process was physically initiated” means a day before 31 December 2008, on which “preparatory work” was undertaken on the installation’s building site.
The new Law is therefore intended (among others, obviously) to enable the operators, which undertook “preparatory work”, before 31 December 2008, on the installation’s building site, to be granted greenhouse gas emissions permits for these future installations by 30 June 2011.
The reasons to the new draft Law mention that the above-stated approach forms a derogation from the general rule according to which only an installation that is commissioned may be included in the scheme. The permit granted to the operators undertaking investments for the production of electricity will not, however, contain provisions on the allocation of allowances because, till commissioning, the installation won’t operate and, consequently, won’t produce emissions of greenhouse gases.
The reasons to the new draft Law underline, furthermore, that the notion “preparatory work” should be understood in the meaning imposed by the Polish Construction Law of 22 July 1994 (O.J. 2010, No 243, item 1623 as amended). The said Law in article 41 defines “preparatory work” as demarcation of the objects on the building site, the leveling and developing of the building site, building of the temporary objects, the connection of necessary technical infrastructure (Article 41 (3) stipulates, however, that preparatory work can be performed only on the building site which is covered by the construction permit).
The Polish media (http://www.wnp.pl/wiadomosci/136445.html) cited on 31 March the words of the Polish environment minister Andrzej Kraszewski. According to these releases, Polish power plants obtained from the European Commission free emission allowances for years 2013 – 2019. Pursuant to the minister’s words, ‘among the beneficiaries are operators which started the investment process by the end of December 2008’. The minister further specified that the matter regarded Article 10c, i.e. the rules on allocation of emission allowances for operators which started the investment process by December 2008. The minister said that, ‘As it seems, we will have these 15 GW and we will be able to calm down the investors that these installations will get free allowances’. He also added that ‘We won’t be probably glad with everything but it seems that the majority of our postulates will be respected’.
The minister reserved that he had received the answer from European Commission on 28 March in the evening and had been only after the preliminary reading thereof.
In my opinion the question seems to be, however, still doubtful. The guidance document of the European Commission literally doesn’t relate to the situation where operators, which undertook “preparatory work”, before 31 December 2008, on the installation’s building site, are granted greenhouse gas emissions permits for these future installations by 30 June 2011. The operators are still exposed to legal risks in that field then.