When a NAP is up-to-date

This matter is especially important, because it determined, that arguments of the Commission failed (see assertion of the Court: [...] the Commission’s argument that, by virtue of the principle of equal treatment between Member States, it could not take account of certain updated data in the NAP must be dismissed as unfounded”), but on the other hand  caused, that a new Member States (which appealed from the Commission’s decisions) can be now the only one, where in order to prescribe actual cap for emissions, there should be taken into account disadvantageous (lowered by a global recession) emissions figures for 2008.

Let’s recall, that the issue of admissibility of adjustments in NAP after the Commission had approved it, was contentious.

It is clear, that in the third settlement period (2013-2020) energy – climate package (adopted in December 2008) has restricted such possibilities.

In the second settlement period (2008 – 2012) the Commission also had tried to introduce the said rule (having taken into account the stability of the cap-and-trade system), nevertheless, following the case law, appeared some gaps in this policy (see: the issue of admissibility of ex post adjustments analyzed in other our articles) and finally, actual Judgment of the Court in practice annulled that rule in the second settlement period.

It should be noted, that according to the Court considerations:

„[...] the Commission is required permanently to ensure that the NAPs take account of the most exact and thus the most up-to-date information possible in order to cause the least damage to economic development and employment, while at the same time maintaining an efficient system of greenhouse gas emission allowances.”

If an NAP was based in part on incorrect information or erroneous evaluations relating to the level of emissions in certain sectors or certain installations, the Member State in question would have to be entitled to propose amendments to the NAP, including increases to the total quantity of allowances to be allocated, in order to address those problems before they produced market repercussions.

The Court emphasized – having regard to the case law, the wording of the Directive and objectives of the system established by it – that a Member State has possibility, following the Commission’s decision adopted in accordance with Article 9(3) of the Directive, to modify the data contained in its NAP in order, for example, to take account of new information received.

Taking into account above considerations of the Court, it is probable, that in the further procedure of approving the NAP emission figures relating to verified emissions for 2008 will be very important.

But consequently, if the recession pass by and these figures take more advantageous for carbon dependent companies shape, the Court findings will be the base for a new scrutiny and adjustment of a NAP.

The division of powers between the Community and Member States in a field of environment

This issue is maybe not so controversial as that mentioned above, but nevertheless is worth reminding. The Court considered, that in this case forgot of the matter also the European Commission.

The matter is, that in a field, such as that of the environment governed by Articles 174 EC to 176 EC, where the Community and the Member States share competence, the Commission has the burden of proving the extent to which the powers of the Member State and, therefore, its freedom of action, are limited.

The Commission failed to do this in the case.

So, in the possible future contentious issues relating to the division of powers between Member States and the European Commission in the matter of the functioning of the European Emission Trading Scheme and broadly speaking – climate politics – Member States are in a favorable position in a trial.

They can require the Commission – if the latter pursue to challenge the national politics - to prove inconsistency of the legal act with the Community law.

It is worth remembering, since taking into account rigorous Community climate politics and possible economic and social effects thereof, many of disputes can appear in the near future (but unnecessarily ending in a court).

Error in the assumption

It seems, that, if European Commission intended already in 2008 to centralize the procedure for the allocation of allowances – as it was done in the third settlement period (2013-2020) – an error in the Directive was made, where there wasn’t sufficient legal basis for this.

The administrative practice of the Commission could not substitute for a sufficient legal basis.

As the Court unambiguously emphasized, the Commission in fixing a maximum level for the total quantity of allowances to be allocated in the contested decision, exceeded the powers conferred upon it pursuant to Article 9(3) of the Directive.

The Commission limited itself to substituting its own data for those contained in the NAP, without in any way reviewing the compatibility of the latter with the criteria set out in the Directive

The Court explained, that: “the Commission thus did not content itself, before the adoption of the contested decision, as it was entitled to do, with comparing the data in the NAP with those which it had obtained from its own assessment method, for the purpose of assessing the compatibility of the former with the criteria set out in the Directive. On the contrary, the review method which it used amounts, in practice, to allowing the Commission itself to draw up its own reference NAP in a totally autonomous manner, and to assess the compatibility of the notified NAPs not having regard to the criteria set out in the Directive but, first and foremost, having regard to the data and results obtained from its own method.”

As noted the Court in the case relating to Estonia “the drawing up of a national allocation plan, designed to attain the aims of the Directive and complying with the criteria set out in Annex III, requires the Member State to carry out several complex economic and ecological assessments, particularly as regards the policies and the specific measures to be adopted at the national level in order to attain the said objectives, but also as to the measures which should be applied by economic operators."

Those assessments are essentially prospective, since the Member State must predict the evolution of emissions in its territory many years in advance.

Furthermore at the stage of prognosis such choices in principle are neither correct nor incorrect.

The outline of the correct procedure

Summing up, it follows from the reasons of both judgments (of Poland and of Estonia), that, according to the Court views, the procedure envisaged in the Article 9 (3) of the Directive should consist in:

1) Member State drawing up the NAP should choose:

a. policies, means and methods to be applied,

b. data as a basis for prognosis of future changes in emission figures;

2) the tasks of the Commission are:

a. to verify the reliability and coherence of all aspects of the plan drawn up by the Member State,

b. to review whether those elements constitute all of the factors to be taken into consideration,

c. to review whether those data are capable of supporting the conclusions which are drawn from them.

From the reasoning of the Court (in particular relating to Estonia) follow some guidelines for the Commission – to use in the course of the above outlined procedure:

1) the Commission should compare the data in the NAP with those which it had obtained from its own assessment method, for the purpose of assessing the compatibility of the former with the criteria set out in the Directive,

2) in reviewing choices of the Member State, the Commission must respect the margin for manoeuvre which the Member State has and, and in so far as the latter bases its reasoning on credible and sufficient data and parameters for analysis, having regard to the criteria in Annex III, it cannot reject its national allocation plan,

3) the Member State could validly choose different data as the starting-point for its forecasts,

4) the Commission’s approach, amounting to taking the view that only the data chosen by itself could be used for the purposes of drawing up a national allocation plan, deprives the Member States of all margin of manoeuvre in that regard and is inadmissible.

It follows from whole of the above considerations, that there can be some concerns relating to the term of issuing of allowances for 2010 (28 February 2010). In the case of further disagreement between some Member States and the Commission in that matter, the time is lacking for the drawing up a new NAP and the review and approval of it by the Commission. Especially, when the Commission would like to take into account – during the review of NAP - all the guidelines made by the Court. 

As is apparent, the administrative practice applied by the Commission so far in relation to the method of assessing NAP’s, was very simplified. According to the case law, such an approach can’t be continued. As a effect, the procedure of approving NAP will be more time-consuming.

So, let’s hope, that applications for the annulment of the Commission decisions relating to other Member States, that still aren’t ruled on by the Court, will be decided in the near future.

But first of all it’s time and starting point for hard negotiations.

The above outlined „first impressions” relating to the Judgment of course don’t cover all problems and issues. We will return to this topic.



The landscape after the judgment – prognosis of legal effects and further scenarios

Copyright © by Michał Głowacki 2009


The landscape after the judgment – prognosis of legal effects and further scenarios

Copyright © by Michał Głowacki 2009