ArcelorMittal Rodange et Schifflange SA v. State of the Grand Duchy of Luxembourg

Summary:

Claimant challenged Luxembourg's law implementing the EU Emissions Trading Scheme (EU ETS), which permitted the government to request the surrender of emissions allowances, without compensation, that had not been used because the claimant had ceased greenhouse gas-emitting activities. The European Court of Justice (ECJ) held that the Luxembourg law was not inconsistent with Directive 2003/87/EC, which established the EU ETS.

ArcelorMittal Rodange et Schifflange SA (ArcelorMittal) operated an installation in Schifflange, Luxembourg until the end of 2011, which was subject to the EU ETS. Luxembourg’s Minister of the Environment allocated ArcelorMittal a total quantity of 405,365 emissions allowances for the period between 2008 to 2012. In April 2012, ArcelorMittal requested that the Minister of the Environment cease environmental monitoring because the activities of its Schifflange installation had been suspended for an indefinite period since the end of 2011. In June 2013, the Minister of Sustainable Development and Infrastructure (1) reduced the total emissions allowances allocated to ArcelorMittal between 2008 to 2012 and (2) requested that ArcelorMittal surrender 80,922 emissions allowances without compensation pursuant to Article 13(6) of a Luxembourgish law transposing Directive 2003/87/EC, the Law of 23 December 2004 establishing a scheme for greenhouse gas emission allowance trading. ArceclorMittal brought an action in an administrative court, which referred the matter to the Constitutional Court of Luxembourg, which in turn referred it to the EJC for a preliminary ruling.

The question before the EJC was whether Article 13(6) of the 2004 law, which allows the Luxembourgish Minister of the Environment to order the surrender, without full or partial compensation, of allowances issued but not used, is compatible with Directive 2003/87/EC, or whether Directive 2003/87/EC must be interpreted as precluding national laws that allow the competent authorities to require the surrender without compensation of emissions allowances that have been issued but not used.

The ECJ held that Directive 2003/87 must be interpreted as not precluding national legislation that allows member states to require the surrender, without full or partial compensation, of unused allowances that have been improperly issued to an operator, as a result of the operator's failure to comply with its obligation to timely inform the competent authority of the cessation of the operation of an installation. The EJC further concluded that the allowances issued after an operator has ceased the activities performed in the installation to which those allowances relate, without informing the competent authority beforehand, cannot be classified as emissions “allowances” within the meaning of Directive 2003/87.

At Issue: Whether the EU emissions trading system permits member states to demand the surrender, without compensation, of unused allowances when a covered facility has ceased greenhouse gas-emitting activities.