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Emissions trading: DEHSt applies hardship provision lawfully
Administrative court of Berlin dismisses suits filed by affected enterprises
Year of issue
Date 27/05/2007
Date 27/05/2007
Partial victory for the German Emissions Trading Authority (DEHSt) at the Federal Environment Agency (UBA) in the administrative court of Berlin: 5 operators from among the some 1,850 installations participating in emissions trading filed unsuccessfully for free allocation of emissions allowances pursuant to a hardship provision in the Allocation Law (ZuG 2007). The installation operators felt excessively burdened by reduced allocations. DEHSt had rejected application of the hardship provision in ZuG 2007 in a number of cases because the forecast additional costs of purchasing emissions allowances were not significant. The administrative court of Berlin has now affirmed this practice by DEHSt in all cases and has thrown out the operators’ suit in the first instance.
The companies filing suit had applied for allocation of emissions certificates on the basis of their expected emissions and not on the basis of actual emissions produced in the past during the base period. Recognition of an installation as a hardship case pursuant to Paragraph 7 Article 10 of ZuG 2007 requires,
- that owing to exceptional circumstances
- there exist a legally established difference between allocation based on historical emissions and forecast emissions and,
- that enterprises thereby suffer significant economic disadvantages as a result.
It was this third criterion that DEHSt applied that the enterprises had challenged. DEHSt determined that additional costs for the purchase of additional emissions allowances amounting to up to one percent of annual performance (resulting from normal business activity) were not substantial. The administrative court of Berlin approved this practice; however, it allowed for appeal of the judgement. The final detailed opinion of the court is still pending.
Emissions trading is a flexible instrument instituted by the Kyoto Protocol with which to control annual volumes of carbon dioxide emissions. Emissions trading in the harmful greenhouse gas carbon dioxide began in the European Union on 1 January 2005. Participating enterprises in the energy and energy-intensive sectors of the 2005-2007 trading period had been allocated free emissions allowances.
The DEHSt at UBA plays a key role in emissions trading in Germany. Among its tasks are to award the certificates available in Germany to the installation operators participating in trading in the country. It also manages the trading accounts, collects data on installations’ emissions, and makes this information available to the public.