Climate Law Week 2A

What determines if an installation is "in scope" of the EU ETS?

An installation is in scope if it carries out activities listed in Annex I of the ETS Directive. This includes technical thresholds such as combustion of fuels with a total rated thermal input exceeding 20 MW or glass manufacturing exceeding 20 tonnes per day.

What is the "surrender obligation" and its deadline?

Member States must ensure that by September 30 each year, an operator surrenders a number of allowances equal to the total emissions from that installation in the preceding calendar year.

What happens if an operator fails to surrender sufficient allowances by the deadline?

The operator is held liable for an excess emissions penalty of EUR 100 for each tonne of CO2 equivalent not covered by a surrendered allowance

Can a Member State reduce the €100 penalty based on the principle of proportionality?

• No → In the Billerud and Bitter cases, the ECJ ruled that penalties for failing to surrender allowances cannot be varied nationally based on proportionality

• The court found the flat-rate penalty itself to be consistent with the EU Charter of Fundamental Rights because timely surrender is a "core principle" of the ETS

Is there any legal defense for failing to surrender allowances on time?

• Only force majeure

• This is defined as unusual and unforeseeable circumstances beyond the control of the operator

What is the difference between the two penalty regimes in the Directive?

• Article 16(3): A specific, mandatory EU-wide flat-rate penalty specifically for failing to surrender allowances

• Article 16(1): A general requirement for Member States to create national penalties for other infringements (e.g., incorrect reporting). These must be effective, proportionate, and dissuasive

Does entering bankruptcy or insolvency release an operator from ETS obligations?

• No → In the Norwegian Air Shuttle (NAS) case, the EFTA Court ruled that the obligation to surrender allowances and pay penalties are strict obligations

What are the key annual dates for an ETS operator?

• January: Receive free allowances (if applicable)

• March 31: Deadline to submit the verified emissions report and activity report

• September 30: Final deadline to surrender allowances