The German Emissions Trading Authority (DEHSt) at the Federal Environment Agency (UBA) lawfully applied a second hardship provision in the Allocation Law (ZuG 2007), according to which companies could be granted allocations during the first 2005-2007 trading period based on reported emissions in the event that allocations based on historic emissions during the 2000-2002 base period had meant undue hardship for the company. The administrative court of Berlin affirmed this practice by DEHSt on 31 May 2007 and threw out the operators’ suits.

Operators of 61 of the some 1,850 installations participating in emissions trading had alleged undue hardship during the allocation procedure for the first trading period. They claimed to be excessively burdened by cuts in allocations; DEHSt acknowledged five such cases.

Pursuant to Paragraph 7 Article 11 of ZuG 2007, a hardship case is an undefined legal concept. In the opinion of the administrative court of Berlin, DEHSt applied the notion appropriately and was correct to require the operators to substantiate grounds for privileged allocation. The reasons for the judgment are not yet public.
Further interpretation of ZuG 2007 remains controversial, namely whether in the case of acknowledged hardship pursuant to Paragraph 7 Article 11 the application of a criterion defining hardship cases (fulfilment factor) as well as that of proportionate cuts were lawful. A complainant who had filed suit against application of the fulfilment factor as well as proportionate reductions in hardship cases won the case in the administrative court of Berlin on 31 May 2007. The reasons for the judgment have not yet been publicised.

Emissions trading is a flexible instrument of the Kyoto Protocol which controls annual carbon dioxide emission volumes. Emissions trading in the climate-damaging greenhouse gas carbon dioxide started on 1 January 2005 in the European Union. Businesses in the energy and energy-intensive sectors participating in trade during 2005-2007 trading period were granted emission allowances free of charge.

The German Emissions Trading Authority (DEHSt) at the Federal Environment Agency plays a key role in emissions trading in Germany. Among its tasks is the allocation of certificates available in Germany to participating operators and administration of trading accounts. DEHSt also collects data on installation emissions, reviews these figures, and makes them public.

Further information on the hardship provision: Emissions trading: DEHSt applies hardship provision lawfully