Schaefer Kalk GmbH & Co. KG v. Germany

Summary:

A German company operating a facility covered by the EU carbon emissions trading system argued that carbon dioxide that is transferred to a non-covered facility and becomes chemically bound - and is thus not released into the atmosphere - should not be considered "emitted." The European Court of Justice agreed, invalidating an EU regulation insofar as it systematically included carbon dioxide that becomes so chemically bound in the trading scheme regardless of whether that carbon dioxide is actually emitted into the atmosphere.

Schaefer Kalk GmbH & Co. KG (Schaefer Kalk) operates an installation for the calcination of lime in Hahnstätten, Germany, which is subject to the European Union Emissions Trading Scheme (EU ETS). During the lime calcination process carbon dioxide is emitted, which Schaefer Kalk transfers to an installation that is not covered by the EU ETS for the production of precipitated calcium carbonate (PCC). In the process of getting its monitoring plan approved, Schaefer Kalk applied for authorization to subtract the carbon dioxide transferred for PCC production from the amount of greenhouse gas emissions in the company’s emissions report. Schaefer Kalk argued that the transferred carbon dioxide is chemically bound in the PCC and that, not being emitted into the atmosphere, it cannot be regarded as “emissions” as defined in Article 3(b) of Directive 2003/87/EC.

The German Emissions Trading Authority at the Federal Environment Agency (DEHSt) approved the monitoring plan without addressing the issue of subtracting transferred carbon dioxide. Schaefer Kalk brought a complaint to the DEHSt, which was rejected. The DEHSt argued that subtraction was not legal under Article 49 of Regulation (EU) No 601/2012 and Annex IV thereto, which only provides that carbon dioxide transferred to one of the long-term geological storage installations listed in that article may be subtracted from the emissions.

Schaefer Kalk subsequently brought the matter before the Berlin Administrative Court and argued that Article 49(1) of Regulation No 601/2012 and point 10(B) of Annex IV thereto subject carbon dioxide bound in PCC and transferred for the production of that substance to mandatory participation in the EU ETS, and are therefore not covered by the powers granted under Article 14(1) of Directive 2003/87/EC. The Berlin Administrative Court then referred the matter to the European Court of Justice (ECJ).

The ECJ held that the second sentence of Article 49(1) of Regulation No 601/2012 and point 10(B) of Annex IV to that regulation are invalid in so far as they systematically include the carbon dioxide transferred to another installation for the production of PCC in the emissions of the lime combustion installation, regardless of whether or not that carbon dioxide is released into the atmosphere.

At Issue: Company challenged treatment of carbon dioxide that becomes chemically bound as emitted for purposes of the EU Emissions Trading Scheme.