JUDGMENT OF THE GENERAL COURT (Second Chamber)
26 July 2023
(*)
(Environment – Directive 2003/87/EC – System for greenhouse gas emission allowance trading – Transitional free allocation of greenhouse gas emission allowances – Installations producing a product which is not covered by a product benchmark – No direct substitutability between the products – Rejection of data relating to the free allocation of allowances concerning those installations – Obligation to state reasons – Manifest errors of assessment – Equal treatment – Duty of diligence – International obligations and commitments of the European Union – Plea of illegality)
In Case T‑244/21,
Luossavaara-Kiirunavaara AB, established in Luleå (Sweden), represented by A. Bryngelsson, F. Sjövall and A. Johansson, lawyers,
applicant,
supported by
Kingdom of Sweden, represented by O. Simonsson, C. Meyer-Seitz, A. Runeskjöld, M. Salborn Hodgson, H. Shev, H. Eklinder and R. Shahsavan Eriksson, acting as Agents,
intervener,
v
European Commission, represented by G. Wils and B. De Meester, acting as Agents,
defendant,
THE GENERAL COURT (Second Chamber),
composed of A. Marcoulli, President, S. Frimodt Nielsen (Rapporteur) and R. Norkus, Judges,
Registrar: P. Cullen, Administrator,
having regard to the written part of the procedure,
further to the hearing on 26 January 2023,
gives the following
Judgment
1        By its action under Article 263 TFEU, the applicant, Luossavaara-Kiirunavaara AB, seeks the annulment of Article 1(3) of Commission Decision (EU) 2021/355 of 25 February 2021 concerning national implementation measures for the transitional free allocation of greenhouse gas emission allowances in accordance with Article 11(3) of Directive 2003/87/EC of the European Parliament and of the Council (OJ 2021 L 68, p. 221; ‘the contested decision’).
Background to the dispute
2        The applicant is a Swedish State-owned mining company. It produces, inter alia, iron ore, the main raw material used for the production of steel. The present case concerns three of its installations, namely the installations SE-497, SE-498 and SE-499 situated respectively in Kiruna, Malmberget (Gällivare) and Svappavaara in Sweden, mentioned in Annex III to the contested decision.
3        The installations at issue are covered by the greenhouse gas emission allowance trading system of the European Union (‘the ETS’) established by Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for greenhouse gas emission allowance trading within the Union and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32), as amended by Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 (OJ 2018 L 76, p. 3).
4        As is apparent from the contested decision, from 2013 onwards, auctioning became the rule for the allocation of emission allowances to operators of installations within the scope of the ETS. However, eligible operators will continue to receive free allowances in the trading period 2021 to 2030, also known as the fourth trading period. During that period, the amount of allowances that each such operator receives is determined based on harmonised rules which are set out in Directive 2003/87 and in Commission Delegated Regulation (EU) 2019/331 of 19 December 2018 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87 (OJ 2019 L 59, p. 8).
5        In 2019, in order to prepare the transitional free allocation for the period beginning 1 January 2021, the Kingdom of Sweden, through the Naturvårdsverket (Environmental Protection Agency, Sweden), submitted to the European Commission, in accordance with Article 11 of Directive 2003/87, a list of the installations covered by that directive and the free allowances allocated to each installation. In that context, it proposed that sub-installations of the installations at issue be included in the list for free allocation of allowances on the basis of the product benchmark for sintered ore in Annex I to Delegated Regulation 2019/331 (‘the benchmark for sintered ore’), whereas heat and fuel benchmarks had been used in that respect previously (‘the Kingdom of Sweden’s proposal’).
6        Following its analysis of the information submitted by the Kingdom of Sweden in the light of the criteria set out in Directive 2003/87 and in Delegated Regulation 2019/331, the Commission decided to reject the Kingdom of Sweden’s proposal for the reasons given in recital 13 of the contested decision.
Forms of order sought
7        The applicant, supported by the Kingdom of Sweden, claims that the Court should:
–        annul Article 1(3) of the contested decision;
–        order the Commission to pay the costs.
8        The Commission contends that the Court should:
–        dismiss the action;
–        order the applicant to pay the costs.
Law
9        In essence, the applicant submits that the contested decision is unlawful because it rejects the Kingdom of Sweden’s proposal to include its production of iron ore pellets in the benchmark for sintered ore. It puts forward six pleas in law in support of the action:
–        the first alleges infringement of Annex I to Delegated Regulation 2019/331 and of Article 10a(1) of Directive 2003/87;
–        the second alleges infringement of the principles of equal treatment and non-discrimination;
–        the third alleges breach of the European Union’s obligations and commitments under international environmental law;
–        the fourth alleges breach of the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case;
–        the fifth alleges breach of the obligation to state reasons laid down in Article 296 TFEU;
–        the sixth, submitted in the alternative, seeks a declaration, pursuant to Article 277 TFEU, that Delegated Regulation 2019/331 is invalid in so far as it applies to the contested decision.
The first plea, alleging infringement of Annex I to Delegated Regulation 2019/331 and of Article 10a(1) of Directive 2003/87
10      The applicant, supported by the Kingdom of Sweden, claims that the provisions of the contested decision which concern it infringe Annex I to Delegated Regulation 2019/331 and Article 10a(1) of Directive 2003/87.
It relies, first of all, on the wording of the benchmark for sintered ore and on the objectives of the applicable legislation. It is thus apparent from that wording, now reproduced in Annex I to Delegated Regulation 2019/331 as regards the fourth trading period and previously defined in Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87 (OJ 2011 L 130, p. 1), that iron ore pellets are a form of sintered ore like sintered ore itself. Next, the applicant claims that its interpretation is in conformity with the objectives of the applicable legislation, according to which, inter alia, the use of more energy-efficient techniques should be incentivised. Last, it maintains that iron ore pellets are directly substitutable for sintered ore and must therefore be included in that benchmark. It relies, in that regard, on the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), in which that question is addressed. The refusal to include iron ore pellets in the products covered by the said benchmark thus constitutes a manifest error of assessment on the part of the Commission.
11      The Commission disputes the applicant’s line of argument.
Preliminary observations
12      As the Commission emphasises and as is apparent from both the applicable legislation and the contested decision, the ETS is based on the following principles: first, the auctioning of allowances is the rule and the free allocation of them is the exception, decreasing gradually with a view to reaching their complete abolition in 2027 (see, to that effect, judgment of 20 June 2019, ExxonMobil Production Deutschland, C‑682/17, EU:C:2019:518, paragraph 65 and the case-law cited), and, second, the ETS seeks to reduce greenhouse gas emissions into the atmosphere to a level which prevents dangerous anthropogenic interference with the climate system, with the ultimate aim of protecting the environment (see, to that effect, judgments of 8 March 2017, ArcelorMittal Rodange et Schifflange, C‑321/15, EU:C:2017:179, paragraph 24, and of 20 June 2019, ExxonMobil Production Deutschland, C‑682/17, EU:C:2019:518, paragraph 62).
13      In that context, the Commission has broad discretion in determining the benchmarks in individual sectors or subsectors under Article 10a(2) of Directive 2003/87. That exercise entails, on the institution’s part, choices and complex technical and economic assessments as well (see judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraphs 31 and 37 and the case-law cited).
14      It has also been held that the question whether the special characteristics of a particular installation have a bearing on its inclusion among the reference installations for the purposes of setting the benchmark for sintered ore clearly falls within the sphere of complex technical assessments, in which the Commission has broad discretion (see judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 44
and the case-law cited).
15      According to the case-law, where an EU institution is called upon to make complex assessments it enjoys a wide measure of discretion, the exercise of which is subject to a judicial review restricted to verifying that the measure in question is not vitiated by a manifest error or a misuse of powers and that the competent authority did not clearly exceed the bounds of its discretion (see, by analogy, judgment of 15 December 2016, TestBioTech and Others v Commission, T‑177/13, not published, EU:T:2016:736, paragraph 77 and the case-law cited).
16      As regards the assessment by the EU Courts as to whether an act of an institution is vitiated by a manifest error of assessment, it must be stated that, in order to establish that that institution committed a manifest error in assessing complex facts such as to justify the annulment of that act, the evidence adduced by the applicant must be sufficient to make the factual assessments used in the act implausible. Subject to that review of plausibility, it is not the Court’s role to substitute its assessment of complex facts for that made by the institution which adopted the decision (see, by analogy, judgment of 15 December 2016, TestBioTech and Others v Commission, T‑177/13, not published, EU:T:2016:736, paragraph 78 and the case-law cited).
17      The abovementioned limits to the review by the EU Courts do not, however, affect their duty to establish whether the evidence relied on is factually accurate, reliable and consistent, whether that evidence contains all the information which must be taken into account in order to assess a complex situation, and whether it is capable of substantiating the conclusions drawn from it (see, by analogy, judgment of 15 December 2016, TestBioTech and Others v Commission, T‑177/13, not published, EU:T:2016:736, paragraph 79 and the case-law cited).
18      It is with those principles in mind that the arguments of the parties must be examined.
The wording of the benchmark
19      The applicant submits that the iron ore pellets produced by its installations, which it calls ‘sintered pellets’, fall within the definition of the products covered by the benchmark for sintered ore. In its view, that interpretation of the wording is confirmed by the Commission document entitled ‘Guidance Document n°9 on the harmonised free allocation methodology for the EU ETS post 2020’, an Ecofys report annexed to the application, entitled ‘Sinter versus benchmark, input to be sent to Swedish government representatives’, and the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588). In the light of that definition, it is not clear from the contested decision why the data corresponding to the installations at issue were rejected.
20      In the case at hand, it must first of all be noted that, in justifying the contested decision, the Commission recalled that ‘the [benchmark for] sintered ore … [was] defined in Annex I to Delegated Regulation 2019/331’ and considered that ‘the definition of products as well as the definition of processes and emissions covered by that product benchmark [were] tailored to sinter production and [did] not include iron ore pellets’. It also noted that ‘Article 10a(2) of Directive 2003/87 require[d] an update of the benchmark values for [the fourth phase of the ETS], and [did] not provide for any adjustment of the interpretation of the benchmark definitions’ (see recital 13 of the contested decision, read in conjunction with Annex III, which concerns the ‘installations [at issue] using [a] sintered ore product benchmark instead of heat or fuel benchmarks’).
21      Annex I to Delegated Regulation 2019/331 specifies a total 52 product benchmarks, including the benchmark for sintered ore, to be used for the free allocation of emission allowances. In addition to its name and starting point, in quotas per tonne, used to determine the annual reduction rate for the purpose of updating the value of the benchmarks, each of those product benchmarks contains two items: the first, relating to the ‘definition of products covered’, and the second, relating to the ‘definition of processes and emissions covered (system boundaries)’.
22      In the case at hand, in the benchmark for sintered ore, the definition of the products covered is the following: ‘Agglomerated iron-bearing product containing iron ore fines, fluxes and iron-containing recycling materials with the chemical and physical properties such as the level of basicity, mechanical strength and permeability required to deliver iron and necessary flux materials into iron ore reduction processes. Expressed in tonnes of sintered ore as leaving the sinter plant’ (‘the definition of the products covered’).
23      So far as concerns the definition of the processes and emissions covered (system boundaries), the benchmark for sintered ore specifies that ‘all processes directly or indirectly linked to the process units: sinter strand, ignition, feedstock preparation units, hot screening unit, sinter cooling unit, cold screening unit and steam generation unit are included’ (‘the definition of the processes and emissions covered’).
24      At the outset, it should be noted that the terminology used to distinguish the products at issue varies. According to the Commission, the term ‘sintered pellets’ used by the applicant is rather unusual. In the present case, rather, sinter or sintered fines should be distinguished from pellets (also referred to as ‘boulettes’ in French).
25      In the first place, it should be noted that, in response to a question put at the hearing, the applicant acknowledged that, in the benchmark for sintered ore, the definition of the products covered did not mention ‘iron ore pellets’. Nor is that product mentioned in that benchmark as regards the definition of the processes and emissions covered. Contrary, therefore, to what the applicant asserts in the application, iron ore pellets cannot be considered to ‘fall squarely’ under the wording of that benchmark.
26      Thus, the Commission was justified in taking the view in the contested decision that the benchmark for sintered ore did not include, at least in its definitions, iron ore pellets.
27      In response to other questions put at the hearing, the applicant moreover stated that its assertion that iron ore pellets ‘fell squarely’ under the wording of the benchmark for sintered ore was based rather on the idea that those pellets had all the characteristics envisaged by the first sentence of the definition of the products covered (see paragraph 22 above). It also stated that such an interpretation seemed to it to be conceivable in the light of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588).
28      Accordingly, by that assertion, the applicant submits, in essence, that iron ore pellets are directly substitutable for the products included in the corresponding benchmark for sintered ore, in the light, in particular, of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588). Such an assertion therefore overlaps with the applicant’s line of argument on direct substitutability. The various elements relied on in support of that assertion will therefore be examined below.
29      In the second place, it is apparent from the contested decision that, for the Commission, the definition of the products covered and that of the processes and emissions covered contained in the benchmark for sintered ore are tailored to the production of that ore.
30      Such an assessment is in fact apparent from the following factors.
31      First, in the benchmark for sintered ore, the definition of the products covered indicates that the ‘sintered ore’ referred to by that benchmark is that which leaves a ‘sinter plant’.
32      As the Commission states, however, a sinter plant corresponds to a particular type of installation. A sinter plant is an installation which produces sinter. That type of installation is different from a sintering plant, which can produce sinter and pellets.
33      A number of documents thus distinguish sinter from pellets. By way of example, according to international standard ISO 11323:2010 cited by the Commission, ‘sinter’ is ‘a type of agglomerates produced from fines of ores by means of forced combustion of a mixed fuel’, whereas ‘pellets’ are ‘spheric agglomerates formed by the scaling of ores, usually more fine than 100 μm, with different additives, sometimes followed by an induration of hot or cold liaison’ (see ISO 11323:2010 Iron ore and direct reduced iron – Vocabulary. International Organization for Standardization 2010). The Commission’s reference document on best available techniques for iron and steel production also devotes separate chapters to ‘sinter plants’, on the one hand, and to ‘pelletisation plants’, on the other (see Best Available Techniques (BAT) Reference Document for Iron and Steel Production, European Commission, 2013, Chapters 3 and 4).
34      Consequently, the Commission cannot be criticised for having considered that, in the benchmark for sintered ore, the reference made by the definition of the products covered to a sinter plant refers to an installation which produces sinter and not iron ore pellets.
35      Second, in the benchmark for sintered ore, the definition of the processes and emissions covered mentions ‘sinter strand’ and ‘sinter cooling unit’ and therefore refers to sinter rather than iron ore pellets.
36      It is therefore not possible to infer, as such, from the wording of the definitions of the benchmark for sintered ore that it covers both sinter and iron ore pellets.
37      The applicant is unconvincing when it criticises that assessment on the ground that it is a ‘strained attempt to ascribe legal meaning to a choice between two words – sinter and sintering – neither of which has a (legally) defined meaning, and which are used interchangeably’, which is illustrated by the description of its products ‘as round sinter units’ (‘kulsinterverk’ in Swedish). As is moreover apparent from its own line of argument, it cannot be disputed that there are two types of agglomerates – sinter and pellets – and that the expression used to describe its products falls less within the concept of sinter than that of pellets.
38      It is also necessary to reject the applicant’s argument that there are no obstacles to applying the definition of the processes and emissions covered by the benchmark for sintered ore to a pellet production unit. The purpose of such a definition is to avoid, by its wording, such a broad interpretation by determining in a restrictive manner the processes and emissions covered by the benchmark at issue.
39      Consequently, it must be concluded that the references made by the wording of the benchmark for sintered ore to ‘sinter’ or ‘sintering’ cannot be read as references to pellets or pelletisation (also referred to as ‘bouletage’ in French).
40      In the third place, it must be pointed out that the interpretation of the wording of the definition of the products covered like that of the processes and emissions covered by the benchmark for sintered ore advocated by the Commission in the contested decision is the same as that found in the various documents to which it refers in the present case with regard to the development of that benchmark.
41      Indeed, in preparation for Decision 2011/278, the Commission had commissioned several reports in order to develop a methodology for the free allocation of emission allowances under the ETS after 2012. That methodology incorporated a certain number of general aspects, mentioned in a first report (see Ecofys, Fraunhofer and Öko-Institut, November 2009, ‘Report on the project approach and general issues’; ‘the general report’), but also sectoral aspects, including for the iron ore sector and for the iron and steel sector, both of which were the subject of a report (see Ecofys, Fraunhofer and Öko-Institut, November 2009, ‘Sector report for the iron ore industry’; ‘the iron ore report’ and ‘Sector report for the iron and steel industry’; ‘the iron-steel report’ or, taken together, ‘the sector reports’).
42      Although the reports in question state that they merely set out the views of their authors and not that of the Commission, it must nonetheless be noted that they were drawn up in consideration of an order placed by the Commission and following discussions with the undertakings represented by the associations Euromines and Eurofer.
43      The reports in question were referred to at the hearing in order to determine which recommendations of their authors to the Commission could be taken into account for the purposes of the present case. The parties are in agreement in that respect on the following five observations drawn from a reading of those reports.
44      First, it is apparent from the general report that its purpose was to develop a methodology for the free allocation of emission allowances in order, first of all, to identify the activities for which a product benchmark was possible and, second, to propose appropriate reference criteria for those products or, if it was not possible to establish such criteria, to propose a fall-back approach (see general report, Chapter 3, p. 13, and Chapter 5, p. 36).
45      Second, it is apparent from the sector reports that a general distinction was made between sinter and the production of iron ore pellets. Indeed, the production of pellets was the main subject of the iron ore report (see iron ore report, Chapter 1, p. 1), whereas sinter was dealt with in the iron-steel report (see iron ore report, Chapter 1, p. 1, and iron-steel report, Chapter 4, p. 6). Moreover, the sector reports stated that, while pellets could be used as an alternative to sinter, there were nevertheless significant differences as regards the composition and characteristics of the products and that, therefore, a common benchmark could not be envisaged (see iron ore report, Chapter 3, pp. 5 and 6, and iron-steel report, Chapter 3, p. 10).
46      Thus, the following was apparent from the iron ore report:
‘Iron ore pellets and sinter are comparable in the way that they have the same use in the production of crude steel.
They differ, however, in raw material input, production technology and product characteristics. Sinter is practically always produced at the steelwork site, where it allows solid wastes to be recycled, coke breeze is available for use as a fuel and the degradation of sinter during transport and handling is unproblematic. According to the guidelines for national emission inventories (IPCC, 2006), sinter production has an emission factor of 0.20 t CO2/t sinter, a data collection of Eurofer results in a factor of approximately 0.25 t CO2/t sinter. That means that the emission intensity of sinter making is about six to seven times higher than that of pellet production. Due to the function the sinter process has at integrated iron and steel plants to recycle iron containing solid waste, we recommend to treat sinter and pellet production separately within our work.’
47      Likewise, the following was apparent from the iron-steel report:
‘Coke and sinter are traded intermediate products in the BOF [(basic oxygen furnace)] crude steel production route and should receive own benchmarks in order to allow allocation to installations selling these intermediate products … Alternatively to sinter, pellets can be used as input for the blast furnace. Composition and product characteristics of pellets differ, however, significantly from sinter, [which is] why a common benchmark for sinter and pellets cannot be applied. Since there is only one integrated steel plant in the EU27, where pellet production takes place, we do not recommend benchmarking for pellet production, but appliance of a fall-back approach (see section 5 of the [general report]), just as for pellets produced at mining sites (see sector report on iron ore).’
48      Third, it is apparent from the sector reports, in particular from the abovementioned extracts, that a product benchmark was recommended for sinter. It is also apparent from the said reports that their authors had considered the possibility of another product benchmark so far as concerned the production of iron ore pellets, ultimately concluding that there was no need to make such a recommendation. In particular, the iron-steel report recommended rather that the production of pellets be treated by means of an alternative method (see iron-steel report, Chapter 3, p. 10).
49      Fourth, it is also apparent from the sector reports that a specific question had arisen during the preparation of those reports in relation to an ‘integrated steel plant’.
50      The plant in question is that of Tata Steel (formerly Corus) in Ijmuiden, the Netherlands (‘the Ijmuiden installation’). That installation is part of an integrated steel plant. In addition to blast furnaces, that steel plant also has a pellet production unit and a sintered ore production unit.
51      A reference was made to the existence of the Ijmuiden installation in a footnote below a table on the first page of the iron ore report, which also mentioned that it was a ‘communication from Eurofer. No information is, at present, available’. For its part, the iron-steel report referred to a proposal by Eurofer that the production of pellets in integrated production sites ‘must be aggregated with the sinter strands onsite because they [were] not independent’ (see iron-steel report, Chapter 6, p. 28). Such a proposal was therefore intended to include that plant among the plants concerned by the benchmark for sintered ore. That proposal had not, however, been taken up by the authors of the report, as is apparent from the abovementioned extract (see iron-steel report, Chapter 3, p. 10). At that stage, the recommendation was therefore not to include that plant in the number of plants taken into account under the said benchmark.
52      Fifth, it is apparent from all the reports in question that the proposals made by their authors to the Commission made it possible to determine a limited number of product benchmarks, including the benchmark for sintered ore, which covered approximately 88% of the emissions from the iron and steel production chain, according to Eurofer’s estimates (see iron-steel report, Chapter 3, pp. 12 and 13).
53      In summary, the reports in question proposed (i) to treat sintered ore and the production of pellets differently, (ii) to define a benchmark for sintered ore, (iii) not to define a product benchmark for the production of pellets, (iv) to treat the production of pellets as part of the fall-back approach, and (v) not to include the Ijmuiden installation’s production in the benchmark for sintered ore.
54      When questioned on that point at the hearing, the parties indicated that the five abovementioned observations, like the summary that had been made of them by the Court, were indeed apparent from the reports in question which had been sent to the Commission with a view to drawing up the product benchmarks.
55      The Commission states that it followed the bulk of those recommendations when it drew up the benchmark for sintered ore in deciding that that benchmark and the value of that benchmark were intended exclusively for sinter and excluded pellets.
56      It is indeed the case that, for the setting of the values of the benchmarks of the third phase of the ETS, data were collected by or on behalf of the various European sectoral associations, on the basis of defined rules set out in sectoral manuals. Those data have been verified and, where necessary, supplemented to determine benchmark values on the basis of the performance of the top 10% installations. In the present case, the sectoral manual relevant to the benchmark for sintered ore related only to sinter plants.
57      The exclusion of pelletisation plants from the benchmark for sintered ore was thus reflected in the benchmark value for phase 3, which was based on the 10% best performing installations out of a total of some 30 sinter plants reporting greenhouse gas emission intensities. Had the installations at issue been included under that benchmark, they would have represented the three best performing plants and the value of that benchmark would have been adjusted downwards.
58      One of the recommendations submitted to the Commission was not, however, followed by that institution: the recommendation not to include the Ijmuiden installation under the benchmark for sintered ore (see paragraph 49 above). In discussions with Eurofer in particular, the Commission examined whether that installation ought to be included under the benchmark for sintered ore. Following those discussions on the status of that installation, the Commission concluded that the ‘product definition proposed by the sector (“agglomerated iron-bearing product made from iron ore fines, fluxes and in-plant recycling materials”) seem[ed] to cover sinter-pellet-mix’. That decision precipitated the case giving rise to the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588).
59      The consequences of the Commission’s decision to include the Ijmuiden installation in the benchmark for sintered ore will be examined subsequently, but it should already be noted in this respect that the difference of opinion between the authors of the sector reports and Eurofer relates not to the question whether the production of pellets is included in that benchmark – the answer to which is negative – but to the question whether that benchmark must accord particular treatment to the said installation and to its production even if there is a consensus that the production of pellets should not be included in the same benchmark.
60      In the fourth place, it must be stated that the documents referred to by the applicant to support its interpretation of the wording of the benchmark for sintered ore do not, as such, permit the inference that that wording made it possible to include ore pellets in it.
61      While it is indeed apparent from the Commission guidance document referred to in paragraph 19 above, the non-binding nature of which is not disputed, that the associated activity referred to in Annex I to Directive 2003/87 as regards sintered ore includes ‘metal ore (including sulphide ore) roasting or sintering, including pelletisation’ and that the Prodcom code corresponding to that activity (an acronym for Community Production) is that used by the applicant, such references are not sufficient to establish a correspondence between that activity and the scope of the benchmark for sintered ore.
62      It is thus apparent, as the Commission explains by providing numerous examples, that there may be, as in the present case, a difference between the activity referred to in Annex I to Directive 2003/87 and the scope of the corresponding benchmark or benchmarks. Thus, the activity referred to in that annex, entitled ‘Production of carbon black involving the carbonisation of organic substances such as oils, tars, cracker and distillation residues, where combustion units with a total rated thermal input exceeding 20 MW are operated’ has a broader meaning than the benchmark for carbon black, which covers only furnace carbon black, but excludes ‘gas black’ and ‘lamp black’. Likewise, several product benchmarks may fall under the same activity envisaged by that annex.
63      The same reasoning applies to the reference to the Prodcom code. The fact that the manufacture of certain products under a product benchmark belongs to a certain code does not mean that all manufacturing activities under that code also fall under the scope of that benchmark.
64      In terms of the Ecofys report, annexed to the application, which was prepared in order to support the Kingdom of Sweden’s line of argument, it should be noted that it sets out simply and expressly an ‘interpretation’ that could be given to the applicable legislation while acknowledging that the approach adopted by the Commission in that regard was understandable. Indeed, several passages in that report suggest an approach different from that of the Commission on the ground that such an approach would not be excluded by the benchmark for sintered ore or that it could be argued that a pellet producer could obtain a free allocation of allowances on the basis of that benchmark. Other passages of the report, meanwhile, show a certain understanding of the Commission’s position mentioned above, which was based on the recommendations made in the sector reports. The same report thus stated that, in so far as ‘pellets and sinter [were] strictly speaking not exactly the same product’, ‘it [was] understandable that the Commission based on the Ecofys / Fraunhofer report decided to apply different approaches’.
65      Those documents cannot therefore suffice to call into question the foregoing conclusions.
66      As for the arguments based on the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), and on the comparison with the Ijmuiden installation, those will be considered subsequently in the examination of the line of argument devoted specifically to that judgment.
The objectives of the legislation
67      The applicant submits that the objectives of Directive 2003/87, namely to reduce greenhouse gas emissions, avoid distortions of competition and encourage the use of more energy-efficient techniques, like the principles defined in Article 10a(1) of that directive concerning benchmarks, confirm its interpretation whereby the benchmark for sintered ore includes iron ore pellets. In order to determine those benchmarks, it is for the Commission to assess which products or production processes constitute ‘substitutes’ in order to take into account and promote the most energy-efficient techniques. The benchmarks should also be neutral as to what inputs are used, in order to focus on the emissions and energy efficiency of the production process. Therefore, the benchmarks should incentivise the most emissions-efficient technical developments and those objectives are better met by including rather than excluding the applicant’s installations.
68      In that regard, it should be noted at the outset that it is not disputed, as the applicant and the Kingdom of Sweden submit, that one of the objectives of Directive 2003/87 is to incentivise the reduction of greenhouse gas emissions by rewarding low-emission technologies over technologies which are inferior from an emissions point of view. That is apparent, inter alia, from the wording of Article 10a(1) of that directive, which contains the rules empowering the Commission to establish ex
ante benchmarks, or from recital 30 of Delegated Regulation 2019/331, which states that ‘incentives for emission reductions for activities that produce [greenhouse gases] should be enhanced’. It is therefore necessary that the measures taken in that area have the prospect of encouraging the adoption of the most efficient techniques for reducing emissions.
69      However, it is also indisputable, as the Commission observes, that the general objective of incentivising the reduction of greenhouse gas emissions by rewarding low-emission technologies over technologies which are inferior from an emissions point of view is to be achieved ‘to the extent feasible’, according to Article 10a(1) of Directive 2003/87, recital 4 of Decision 2011/278 or recital 3 of Delegated Regulation 2019/331. The Commission therefore has no obligation of result in that regard. A technique or an activity may in itself have advantages over another in terms of efficiency, but that other technique or activity may also have its own interests, liable as such to be taken into account under the legislation in an overall assessment comparing one with the other. It must thus be noted in that regard, in the light of the content of the sector reports, that that is the case, for example, if the other technique or activity, while being less efficient, also enables the recycling of materials which would otherwise become waste.
70      In the Commission’s view, it is therefore appropriate to take account of all the parameters used to assess several techniques or activities, rather than focusing only on one of those parameters. In particular, it is apparent from the various situations referred to by the Commission, where the product benchmark relates only to parts of activities or certain methods of production (aluminium production), where the activity does not fall under a product benchmark (soda ash as a by-product of caprolactam production) or potentially falls under several product benchmarks (pig iron or steel production), that EU law does not provide for an unconditional individual right to the free allocation of emission allowances in situations where the product benchmarks do not specifically envisage the activity at issue.
71      In other words, the ETS does not claim to guarantee that each activity covered by the system is covered by a product benchmark.
72      It follows from the foregoing that it is not sufficient to allege the existence of a general objective of incentivising the reduction of greenhouse gas emissions by rewarding low-emission technologies over technologies which are inferior from an emissions point of view in order validly to argue that the benchmark for sintered ore includes or allows the wording of that benchmark to be interpreted as meaning that it must also include iron ore pellets.
The alleged direct substitutability between iron ore pellets and sintered ore
73      The applicant, supported by the Kingdom of Sweden, submits that the application of a benchmark must take account of the incentive to develop more efficient technologies. It infers from this that, if available production processes result in a substitute product, more efficient in terms of emissions and energy efficiency, that substitute product or alternative production process must be included within the benchmark. In its view, if the Commission did not take that situation into account when adopting benchmarks, it would be acting contrary to the purpose of Article 10a(1) of Directive 2003/87 (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 47). Consequently, it considers that, should the Court take the view that iron ore pellets are not covered by the wording of the benchmark for sintered ore, it should have regard to the direct substitutability between those pellets and sintered ore.
74      The applicant states that, in principle, according to recital 4 of Decision 2011/278, ‘for each product one benchmark should be defined’ and that, ‘where a product is a direct substitute of another product, both should be covered by the same product benchmark and the related product definition’.
75      In the first place, the applicant puts forward a number of factors to establish the direct substitutability between sintered pellets and sintered ore (also known as ‘sintered fines’). According to it, those products are substituted for each other continuously, both functionally and from a competition perspective. They both enable the blast furnaces in steel mills to be fed with iron ore. In practice, a mixture of sintered fines and sintered pellets, combined with additives, can be used for each European blast furnace as part of its normal operation and in proportions which vary over time. Those findings are supported by the examples of a steel mill in Oxelösund (Sweden), whose integrated agglomeration plant had to stop at the end of 1987 due to freezing, but which was able to continue operating its blast furnace by increasing the input of pellets, or of other steel mills which, from the 1980s, changed their mixture, even going so far as to use 100% sintered pellets for a certain period, by a report of the CRU consultancy firm (see CRU, Substitution potential of pellets and sinter in the European market, 13 March 2020), and by an opinion, dated 3 May 2021, of the chief technology officer of a Swedish steel company.
76      In the second place, the applicant claims that the direct substitutability between iron ore pellets and sintered ore is also apparent from a comparison between the pellets produced by its installations and those produced by the Ijmuiden installation. It is the same product and the same type of plant. Ijmuiden’s standalone pelletising unit is of the same model, from the same supplier and was built at the same time as the applicant’s pellet production plant in Malmberget (Gällivare). Those plants are equipped with identical sintering machines. Moreover, the iron fines used by the Ijmuiden pellet production plant are purchased partly from the applicant. Those are the same fines as those used in the applicant’s installations. The fact that an identical product, produced in the Ijmuiden installation equipped with sintering machines identical to those of the applicant, was included under the benchmark for sintered ore means that there is perfect substitutability between that product and the sintered pellets produced in the applicant’s installations.
77      In the third place, the applicant recalls that the question of including the Ijmuiden installation under the benchmark for sintered ore was the subject of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588). In that case, a competitor of Tata Steel, the steel producer ArcelorMittal, which itself had sintered fine production facilities benefiting from inclusion in the benchmark, wanted the Ijmuiden installation to be excluded. That would have led to a higher benchmark value and therefore more free emissions allowances for ArcelorMittal.
78      For the Court of Justice, according to what the applicant submits, it was correct to include the Ijmuiden installation under the benchmark for sintered ore. The assessments made by the Court of Justice in paragraphs 39, 42, 44 and 47 of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), are relevant to the present case because they also apply to the installations at issue. Indeed, as recital 4 of Decision 2011/278 states, where a product is a direct substitute of another product, both should be covered by the same product benchmark. Similarly, if the product could ‘be used in blast furnaces as a direct substitute for sintered ore’, this warranted the inclusion of the product under the benchmark. Therefore, ‘had the Commission failed to take into account the installation producing a sintered ore substitute[,] it would have adopted a decision contrary to the purpose of Article 10a(1) of Directive 2003/87’. Consequently, were it to transpire that the applicant’s sintered pellets may be used in blast furnaces as a direct substitute for sintered ore, the contested decision would have to be annulled and the said installations would have to be accepted by the Commission under the benchmark concerned. That is a question of fact which must be assessed on the basis of the abovementioned evidence.
79      However, the applicant observes that, in the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), the Court of Justice went on to make a number statements concerning the lack of substitutability of sintered pellets for sintered ore. Those statements of fact – and not of law – are incorrect.
80      Thus, first of all, the Court of Justice’s statement in paragraph 40 of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), according to which pellets and sintered ore cannot generally be substituted for one another, is not correct. In any event, according to the applicant, if it transpired that pellets and sintered ore had been substitutes, those products would all have been covered by the same product benchmark.
81      Next, the explanation set out in paragraph 42 of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), according to which the Commission’s finding of substitutability depends on a particular context in which ‘the … Ijmuiden installation … was the only steel plant in the European Union producing a mixture of pellets and sintered ore which could, owing to its properties, be used in blast furnaces as a direct substitute for sintered ore’ and ‘that integrated steel plant includes both a production unit for pellets and a production unit for sintered ore which are connected in order to provide a mixture directly feeding blast furnaces’, is incorrect. There is no difference between that installation and the other installations for the production of sintered pellets. First, Tata Steel does not ‘mix’ its sintered pellets with sintered fines before feeding the blast furnace; its plants are two geographically distinct units which, from a functional point of view, are not connected, each producing a type of sintered iron ore that may be used in steel production. Second, there is no difference between loading the applicant’s pellets into the blast furnace and loading Tata Steel’s pellets; sinter and pellets are each weighed and loaded separately into Tata Steel’s blast furnace like in all other blast furnaces; Tata Steel even adds the applicant’s pellets to its own pellets in its blast furnace. Third, as the Court of Justice observes in paragraph 44 of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), ‘despite the special characteristics of the installation [at issue], the product manufactured constitutes a direct substitute for sintered ore’. That is correct as a matter of fact, but the direct substitutability of the products has nothing to do with the special characteristics of the Ijmuiden installation or any particular mix (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraphs 45 and 46).
82      Last, the applicant maintains that the interests of all the main parties in the case giving rise to the judgment in the ArcelorMittal case were aligned and contrary to its own. All those parties argued that iron ore pellets and sintered ore were not substitutes in general, although this was not relevant to that case, but expressed different opinions on the question whether the Ijmuiden installation should be included under the benchmark for sintered ore. In the absence of information provided by the applicant, the Court of Justice ruled on incomplete evidence. By indicating that it was ruling only on the case file and on the arguments put forward at the hearing, the Court of Justice itself implied that there might be additional or contrasting relevant facts capable of leading to a different conclusion.
83      The Commission contests the applicant’s arguments.
84      As a preliminary point, it should be recalled that, in the contested decision, the Commission rejected the Kingdom of Sweden’s proposal that the installations at issue be included in the benchmark for sintered ore and that a free allocation of greenhouse gas emission allowances should therefore be made in consideration of such an inclusion.
85      It should next be noted that the parties agree in acknowledging that the characterisation of direct substitutability between iron ore pellets and sintered ore is liable to have consequences for the scope of the benchmark for sintered ore.
86      Indeed, recital 4 of Decision 2011/278, which preceded Delegated Regulation 2019/331, stated the following:
‘To the extent feasible, the Commission has developed benchmarks for products, as well as intermediate products that are traded between installations, produced from activities listed in Annex I to Directive 2003/87 … In principle, for each product one benchmark should be defined. Where a product is a direct substitute of another product, both should be covered by the same product benchmark and the related product definition.’
87      By way of illustration of the consequences of such a characterisation of the direct substitutability of one product for another, it is indeed possible to rely, as the applicant does, on paragraph 47 of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), in which the Court of Justice rules on the particular case of the Ijmuiden installation:
‘Had the Commission failed to take into account the installation producing a sintered ore substitute[,] it would have adopted a decision contrary to the purpose of Article 10a(1) of Directive 2003/87, which is to provide incentives for reductions in greenhouse gas emissions and energy efficient techniques by taking account of the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass and capture and storage of CO2, where such facilities are available and do not encourage an increase in emissions.’
88      The applicant is therefore right to claim that, if it were shown that iron ore pellets were directly substitutable for sintered ore, it would have been necessary, in principle, to ensure that those two products were covered by the same product benchmark and by the corresponding product definition.
89      In that regard, it should be noted that it is not apparent from the contested decision that the Commission carried out a detailed analysis of the direct substitutability of one product for another. In fact, it seems to have confined itself to examining the wording of the benchmark and to recalling that it was not required to make an ‘adjustment of the interpretation of the benchmark definitions’.
90      However, it is apparent from the exchanges between the Kingdom of Sweden and the Commission, and in particular from the Commission’s letter of 29 April 2020, and from the Commission’s letter sent in April 2020 to the Environmental Protection Agency, copies of which were sent by the applicant to the Court as annexes to the application, that the Commission clearly indicated to the Swedish authorities that it considered that iron ore pellets were not directly substitutable for sintered ore, on account, in particular, of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588). It is also apparent from its letter of 26 March 2018 to the Kingdom of Sweden that the Commission stated that it did not intend to change the boundaries of the benchmark for sintered ore.
91      It is in that context that the various arguments put forward by the parties in favour of or against the direct substitutability between iron ore pellets and sintered ore must be assessed.
92      It is necessary, in that regard, to examine, first of all, the arguments concerning the direct substitutability between iron ore pellets and sintered ore as such before considering those relating to the comparability of the situations between the Ijmuiden installation, whose production was already covered by the benchmark for sintered ore, and the installations at issue, which were not.
–       Direct substitutability of the products
93      In their written pleadings, the parties put forward their arguments in favour of or against the direct substitutability between iron ore pellets and sintered ore.
94      It is apparent from those submissions that, despite certain similarities between iron ore pellets and sintered ore, it being possible to use those products for the production of steel in a blast furnace through technical adaptations in the event of a switch from one to the other, those products nevertheless have differences.
95      By way of example, the data submitted by the parties show that the production of sinter is based on ores which are not yet beneficiated and which generally come from iron ore mines outside Europe, whereas, in the production of pellets, the iron ore concentrates used will have been mechanically processed in order to increase their iron content and decrease impurity levels. Thus, the applicant acknowledges that the iron content of sintered fines, which is between 55 and 58%, typically differs from that of iron ore pellets, which is between 62 and 66%. Furthermore, it is not disputed that the applicant is, in Europe, the main producer of such pellets, which are produced mostly from magnetite.
96      Likewise, although, during the production of iron ore pellets, the applicant needs coke breeze, it needs smaller quantities than those used for the production of sinter. Nor is it disputed that, in the context of such production, iron-bearing residues are recycled directly as inputs, whereas another solution must be found when it comes to the said pellets.
97      It should also be noted that the authors of the iron-steel report found that ‘composition and product characteristics of pellets differ[ed] … significantly from sinter’ and that they noted in the iron ore report that, ‘[while] iron ore pellets and sinter [were] comparable in the way that they ha[d] the same use in the production of crude steel[, t]hey differ[ed], however, in raw material input, production technology and product characteristics[; moreover,] sinter is practically always produced at the steelwork site, where it allows solid wastes to be recycled [and] coke breeze is available for use as a fuel’.
98      It is also important to note, as the authors of the iron ore report do, that ‘the emission intensity of sinter making is about six to seven times higher than that of pellet production’. The inclusion of new categories of installations in the benchmark for sintered ore thus risked causing a significant imbalance for installations then falling under that benchmark.
99      Those differences are sufficient for the Commission to be justified in considering, on the basis of the broad discretion conferred in that regard by the case-law and in the light of the various objectives defined by the applicable legislation, that there is no direct substitutability between iron ore pellets and sintered ore so far as concerns the determination of the installations concerned by the benchmark for sintered ore.
–       The Ijmuiden installation and the applicant’s installations
100    The judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), is relied on by the applicant to argue that a solution of the same nature as that adopted for the Ijmuiden installation, namely the inclusion of that installation in the benchmark for sintered ore, had to be applied to the installations at issue.
101    As has been noted, it is important to bear in mind that the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), rules on the situation of the Ijmuiden installation, which had been accorded particular treatment by the Commission during the determination of the scope of the benchmark for sintered ore.
102    In that case, the Court of Justice assessed the validity of Decision 2011/278. In the dispute in the main proceedings, ArcelorMittal Atlantique et Lorraine criticised the Commission’s taking into consideration, as a reference installation for determining the benchmark for sintered ore, a ‘factory [or installation] producing both sintered ore and pellets’ (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 36).
103    The parties disagree as to the conclusions that may be drawn from the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588).
104    For the applicant and the Kingdom of Sweden, it follows that, in so far as the installations at issue are similar to the Ijmuiden installation, the same solution had to be applied to them and the Commission had to consider that iron ore pellets were directly substitutable for sintered ore.
105    In the Commission’s view, such a solution is not applicable given the differences between iron ore pellets and sintered ore and their production, differences identified by the Court of Justice outside the specific case of the Ijmuiden installation.
106    In the case at hand, in the light of the evidence submitted in the present case, it must be held that the installations at issue cannot be regarded as a ‘factory producing both sintered ore and pellets’ within the meaning of paragraph 36 of the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588).
107    It is apparent from the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), that several characteristics of the Ijmuiden installation are highlighted in parallel with those relating to the product at issue consisting of a mixture of pellets and sinter.
108    According to what was indicated by the Commission on the subject of the Ijmuiden installation in the case which gave rise to the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588, paragraphs 42 and 44), it is ‘the only steel plant in the European Union producing a mixture of pellets and sintered ore which could, owing to its properties, be used in blast furnaces’ and ‘that integrated steel plant includes both a production unit for pellets and a production unit for sintered ore which are connected in order to provide a mixture directly feeding blast furnaces’ (paragraph 42 of that judgment).
109    For its part, ArcelorMittal had observed that ‘the [Ijmuiden] installation … had two distinct units producing pellets and sintered ore’ (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 43).
110    It should also be noted that the Court of Justice’s reasoning is based on the following considerations. First, ‘it appears that[,] despite the special characteristics of the [Ijmuiden] installation, the product manufactured constitutes a direct substitute for sintered ore’ (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 44, and Opinion of Advocate General Wahl in ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:192). Second, ‘the final product from such an installation therefore has similar properties to those of sintered ore and can be directly substituted for the latter for use in blast furnaces’ (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 45). Third, ‘in those circumstances, since the two production units together allow the manufacture of a unique product which is substitutable for sintered ore, the production of pellets must be considered to be one of the “processes directly or indirectly linked to the process units” within the meaning of the [benchmark for sintered ore]’ (judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine, C‑80/16, EU:C:2017:588, paragraph 46).
111    As the Court of Justice states in the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588), at the end of paragraph 46 of that judgment, it is the specific factual circumstances of the case which explain why it was considered that ‘the … benchmark for sintered ore [took] into account [that] pellet production unit’.
112    It is apparent from the facts of the present case, however, that, while it cannot be ruled out, as the applicant maintains, that the pellet production unit of the Ijmuiden installation is the same as that of the installations at issue, the fact remains that, unlike the latter installations, the Ijmuiden installation is taken into account as a production unit for an integrated steel plant.
113    Consequently, in view of the elements present in the file, there is no reason to depart from the assessment made by the Court of Justice in the judgment of 26 July 2017, ArcelorMittal Atlantique et Lorraine (C‑80/16, EU:C:2017:588, paragraph 40), according to which ‘pellets and sintered ore cannot generally be substituted for one another’.
114    In the light of the file, and in particular of the conclusion reached in paragraph 99 above, the applicant has not established the existence of a manifest error of assessment on the part of the Commission in that regard.
115    First, the examples of exclusive use of iron ore pellets to feed the blast furnaces, referred to by the applicant, show that they are fall-back approaches or tested solutions, which are, moreover, relatively old.
116    Second, as regards the CRU report, it refers to general considerations setting out a competitive relationship between iron ore pellets and sintered ore or the fact that one can replace the other. That report does not, however, show that it is manifestly incorrect for the Commission to consider that, in view of the differences between those products, the production of the said pellets was not included in the benchmark for sintered ore, which, apart from the particular situation of the mixture coming from the Ijmuiden installation of the integrated steel plant, relates only to the production of sintered ore. In the rejoinder, the Commission sets out in that regard the reasons why it cannot be asserted that switching from a sintered ore feed to an iron ore pellet feed can be done ‘by the press of a button’. Substantial adjustments are necessary to allow the switch from one feed to another, including when it results from a mixture of the products.
117    Third, that more realistic approach is also to be found in the opinion of Mr Kallo relied on by the applicant, which, while concluding that sintered pellets are immediate substitutes for sintered fines, nevertheless confirms that switching from sinter to pellets, in diverse proportions, requires test runs and adaptations, as well as preparatory work, including updating internal logistics to a new raw material flow. That opinion also mentions the fact that iron-bearing residues can no longer be recycled directly by means of the pellets and that another solution, for example briquetting, should be found. As is apparent from the definition of the products covered and as the Commission recalls, however, ‘iron-containing recycling materials’ are among the inputs used for the production of sinter and pellet production does not involve such – or as many – iron-bearing residues.
118    It follows from the foregoing that the applicant has not established that the Commission made a manifest error of assessment in deciding not to include iron ore pellets in the benchmark for sintered ore.
119    Accordingly, the first plea must be rejected.
The second plea, alleging infringement of the principle of equal treatment and non-discrimination
120    The applicant claims that the contested decision infringes the principles of equal treatment and non-discrimination. In order to avoid unequal treatment or discrimination between operators or between sectors, account should be taken, on the one hand, of the comparability of the situation of the installations at issue and that of the Ijmuiden installation, which have no meaningful differences, and, on the other hand, of the direct substitutability between iron ore pellets and sintered ore, both of which enable blast furnaces to be fed with iron ore. Such a difference in treatment has no legitimate reason.
121    The Commission disputes the applicant’s line of argument.
122    It follows from settled case-law that the principle of equal treatment requires that comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified (see judgment of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 23 and the case-law cited). In the present case, however, as has been set out in the examination of the first plea, it cannot be alleged that iron ore pellets and sintered ore are direct substitutes or that those pellets constitute a product identical to that coming from the Ijmuiden installation. There can therefore be no unequal treatment or discrimination on that basis.
123    Accordingly, the second plea must be rejected.
The third plea, alleging breach of the European Union’s international obligations and commitments
124    The applicant submits that the obligation on the European Union to reduce greenhouse gas emissions is based, inter alia, on commitments undertaken under international treaties as well as on internal environmental policies and primary law.
125    In that regard, the applicant states the following. First, the European Union is party to the United Nations Framework Convention on Climate Change (UNFCCC) and to the Paris Agreement, adopted on 12 December 2015, which entered into force in 2016 and is legally binding. Second, the parties to that agreement are obligated to undertake and communicate efforts with a view to limiting the increase in the average temperature of the planet. Those undertakings are referred to as nationally determined contributions (‘NDCs’). Third, in March 2015, the European Union committed to achieving the binding target of reducing greenhouse gas emissions in its territory by at least 40% by 2030 compared to 1990 levels. On 17 December 2020, it submitted its updated NTC, thereby committing itself to achieving the more ambitious target of reducing greenhouse gas emissions in its territory by at least 55% by 2030 compared to 1990 levels. In its NTC, it included an account on how it has taken action to implement its initial NTC since ratifying that agreement, which includes a reference to the ETS and to the fact that the free allocation of emission allowances is made based on ‘benchmarks that reward the most efficient installations in each sector’. Fourth, the direct connection between the ETS and that agreement is referred to in Article 30 of Directive 2003/87, which mentions that it will be kept under review in the light of international developments and efforts undertaken to achieve the long-term objectives of the agreement in question.
126    The applicant also states that the institutions are bound by the agreements they conclude and that those agreements have primacy over provisions in secondary legislation and that such provisions must, so far as is possible, be interpreted in a manner that is consistent with those agreements.
127    In that context, the applicant claims that, through its NTC, the European Union has committed to allocate free allowances in a way that rewards the most efficient installations and that, in those circumstances, excluding its pellet production plants from the benchmark for sintered ore would not reward the most efficient installations producing the iron ore used as an input in the manufacture of steel. Rather, such an interpretation would significantly reduce incentives for emission reductions, and not reward those installations which have become emission effective through investments in greener substitutes and technologies. Thus, the definition of the said benchmark must be interpreted so as to include sintered pellets in order not to breach the commitment regarding the allocation of allowances that the European Union has made under the Paris Agreement.
128    The contested decision must also be interpreted in accordance with the overall emission reduction target to which the European Union has committed under the Paris Agreement. The 55% target requires significant emission reductions, which will be possible only after inter alia a major transformation of heavy industry. This transformation will not progress at the necessary pace unless low emission alternatives are rewarded or, at least, not disfavoured. Consequently, the overall commitment made by the European Union also requires that the benchmark for sintered ore be interpreted so as to include the low emission alternative that are sintered pellets.
129    Furthermore, the applicant submits that the Commission’s argument that granting it a higher number of free allowances than during the third phase of the ETS would not improve the European Union’s implementation of its international obligations disregards the fact that the inclusion of the installations at issue in the benchmark for sintered ore would incentivise the producers concerned to reduce their greenhouse gas emissions and thereby improve the implementation of those international obligations.
130    Last, even if the Paris Agreement and the NDCs connected thereto were not legally binding, account should be taken of the effects for the climate, especially in the light of the internal and external climate commitments of the European Union, whether binding or not. This is an opportunity to refocus the ETS on its core objective, namely the reduction of greenhouse gas emissions and the fight against climate change.
131    The Commission contests the applicant’s arguments.
132    It should be recalled that, by virtue of Article 216(2) TFEU, where international agreements are concluded by the European Union they are binding on its institutions, and consequently they prevail over acts of the European Union (see judgment of 21 December 2011, Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 50 and the case-law cited).
133    It follows that the legality of an act of the European Union may be affected by the fact that it is incompatible with such rules of international law. Where such illegality is pleaded before the General Court, the latter ascertains whether certain conditions are satisfied in the case before it, in order to determine whether, pursuant to Article 263 TFEU, the legality of the act of EU law concerned may be assessed in the light of the rules of international law relied upon (see, by analogy, judgment of 21 December 2011, Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 51 and the case-law cited).
134    First, the European Union must be bound by those rules  (see, by analogy, judgment of 21 December 2011, Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 52 and the case-law cited).
135    Next, the EU Courts can examine the legality of an act of EU law in the light of an international treaty only where the nature and the broad logic of the latter do not preclude this (see, by analogy, judgment of 21 December 2011, Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 53 and the case-law cited).
136    Finally, where the nature and the broad logic of the treaty in question permit the legality of the act of EU law to be reviewed in the light of the provisions of that treaty, it is also necessary that the provisions of that treaty which are relied upon for the purpose of that review appear, as regards their content, to be unconditional and sufficiently precise (see, by analogy, judgment of 21 December 2011, Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 54 and the case-law cited).
137    Such a condition if fulfilled where the provision relied upon contains a clear and precise obligation which is not subject, in its implementation or effects, to the adoption of any subsequent measure (see, by analogy, judgment of 21 December 2011, Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 55 and the case-law cited).
138    In the present case, as the Commission observes, it must first of all be noted that the European Union’s contribution to the Paris Agreement, according to which the Union plans a 55% reduction in greenhouse gas emissions by 2030 compared to 1990 levels, is merely one objective that the Union must achieve collectively through a complex package of measures. In that context, it can hardly be argued that that objective is infringed on the ground that only one of its components is not the most appropriate measure for attaining it.
139    Similarly, the Paris Agreement, by which the parties to the UNFCCC agreed on new objectives compared to those which had been defined in the Kyoto Protocol and which entered into force on 4 November 2016, is an international treaty, under which contributions are communicated and the assessment of which is done essentially by peer review and not by means of dispute settlement based on the violation of unconditional and sufficiently precise norms.
140    It cannot therefore be validly claimed, as the applicant does, that an interpretation of the benchmark for sintered ore which does not include the iron ore pellets produced by the installations at issue breaches the commitment relating to the allocation of allowances undertaken by the European Union in the context of the Paris Agreement.
141    Accordingly, the third plea must be rejected.
The fourth plea, alleging breach of the duty to examine carefully and impartially all the relevant aspects of the individual case
142    The applicant claims that the Commission failed to examine carefully and impartially all the relevant aspects of the individual case. In particular, it criticises it for not having explained in the contested decision the reasons why it could be treated differently from Tata Steel and why sintered pellets could not be regarded as substitutes for sintered fines. The Commission’s position in that regard during the administrative procedure also changed over time and is based on an artificial or erroneous distinction between those products when it comes to assessing their direct substitutability.
143    The Commission contests the applicant’s arguments.
144    It should be noted that it follows from the case-law that, where the EU institutions have been given a power of appraisal, respect for the rights guaranteed by the EU legal order in administrative procedures is of fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case, the right of the person concerned to make his or her views known and to have an adequately reasoned decision. Only in this way can the EU Courts verify whether the factual and legal elements upon which the exercise of the power of appraisal depends were present (see, to that effect, judgment of 21 November 1991, Technische Universität München, C‑269/90, EU:C:1991:438, paragraph 14).
145    In the present case, however, it is apparent from the content of the assessment set out in the examination of the first plea that the Commission cannot be criticised for having applied in a manifestly erroneous manner the benchmark for sintered ore, whether it concerns, first, the refusal to include in that benchmark installations for the production of iron ore pellets which are not envisaged by its wording or its system boundaries or, second, the refusal to consider that the production coming from the installations at issue could be regarded as directly substitutable for sinter for the same reasons as those given in relation to the production coming from the Ijmuiden installation.
146    The Commission cannot therefore be accused of failing to exercise due diligence in that regard.
147    Furthermore, in the light of the content of the correspondence between the Commission and the Kingdom of Sweden referred to by the applicant under the present plea, namely the Commission’s letters of 26 March 2018, 29 April 2020 and April 2020, which merely sets out the responses envisaged by the Commission to the arguments put forward by the Member State concerned on the direct substitutability between iron ore pellets and sintered ore as well as the characteristics specific to the production of those products, the Commission also cannot be criticised for having failed to fulfil its obligation to examine such arguments carefully and impartially during the administrative procedure.
148    Accordingly, the fourth plea must be rejected.
The fifth plea, alleging breach of the obligation to state reasons laid down in Article 296 TFEU
149    The applicant recalls that, under Article 296 TFEU, legal acts are to state the reasons on which they are based.
150    The applicant claims that the present case bears significant similarities to the case that gave rise to the judgment of 7 November 2007, Germany v Commission (T‑374/04, EU:T:2007:332), in which the Commission had made a statement in the decision in support of differential treatment between economic operators without properly justifying the alleged difference in situations and without justifying the difference in treatment. It observes that, despite being critical to proper interpretation and application of product benchmarks, the Commission’s statement of reasons in the contested decision does not provide the slightest explanation regarding the substitutability of products and techniques, or the application of the principle of equal treatment.
151    The applicant also relies on significant similarities between the present case and that which gave rise to the judgment of 21 November 1991, Technishe Universität München (C‑269/90, EU:C:1991:438), as the technical and scientific substitutability between products is discussed there, or that which gave rise to the judgment of 23 May 2019, KPN v Commission (T‑370/17, EU:T:2019:354), which involved the need to set out the facts and the legal considerations having decisive importance in the context of the decision. In its view, the Commission has not even attempted in the present case to substantiate, or even make explicit, its implied allegation that its sintered pellets are not substitutable for sintered fines or Tata Steel’s sintered pellets. It has merely referred to a benchmark definition being ‘tailored to’ sinter production.
152    Finally, the applicant considers that the Commission’s reference to the content of the letters sent to the Kingdom of Sweden in the procedure leading to the adoption of the contested decision cannot compensate for a failure to state the reasons for that decision as regards the applicant, in particular because the content of those letters is not sufficient to satisfy the obligation to state reasons as regards the question of the substitutability of pellets and sinter.
153    The Commission disputes the applicant’s line of argument.
154    It should be noted that the statement of reasons required by Article 296 TFEU must show clearly and unequivocally the reasoning of the author of the contested measure, so as to enable the persons concerned to ascertain the reasons for it in order to defend their rights and to enable the EU Courts to exercise their power of review (see judgment of 23 September 2009, Poland v Commission, T‑183/07, EU:T:2009:350, paragraph 136 and the case-law cited).
155    The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, inasmuch as the question whether the statement of reasons meets the requirements of Article 296 TFEU must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see judgment of 23 September 2009, Poland v Commission, T‑183/07, EU:T:2009:350, paragraph 137 and the case-law cited).
156    It should also be considered that compliance with the obligation under Article 296 TFEU to state reasons, in respect of a decision concerning national implementation measures for the transitional free allocation of greenhouse gas emission allowances, in accordance with Article 11(3) of Directive 2003/87, is of particularly fundamental importance because here exercise of the Commission’s power of review under Article 11(3) of Directive 2003/87 entails complex economic and ecological assessments and review by the EU Courts of the legality and merits of those assessments is restricted (see, by analogy, judgment of 23 September 2009, Poland v Commission, T‑183/07, EU:T:2009:350, paragraph 138 and the case-law cited).
157    In the present case, however, contrary to what the applicant alleges, it cannot claim not to be in a position to understand the reasons why the Commission considered that the benchmark for sintered ore was tailored to the production of sintered ore and did not include, as the Kingdom of Sweden wished, iron ore pellets.
158    It is apparent from the case file that the applicant was in a position to challenge the merits of the contested decision so far as concerns it, whether it be the wording of the benchmark for iron ore, the impact that the various objectives of the applicable legislation might have on its interpretation or the fact that the Commission implicitly but necessarily considered in this case that it was not appropriate to adopt for the installations at issue the same approach as that which it had previously adopted in relation to the Tata Steel installation.
159    It is moreover apparent from the content of the application, and in particular from the content of the various pleas submitted, that the applicant also had good knowledge of the various exchanges that took place during the procedure which led to the adoption of the contested decision between the Kingdom of Sweden and the Commission, which form part of the context.
160    Accordingly, the fifth plea must be rejected.
The sixth plea, alleging that Delegated Regulation 2019/331 is invalid
161    The applicant submits that the contested decision must be annulled on the basis of the invalidity of Delegated Regulation 2019/331, which forms the legal basis of that decision. According to the applicant, that delegated regulation is an act of general application directed at the Member States. It therefore considers that it is unlikely that it would have been granted standing to bring proceedings had it sought its annulment, given that it was not its addressee and that it was not directly and individually concerned by it. It is also a regulatory act which entails implementing measures, such as the contested decision. The applicant thus considers itself entitled to seek its annulment incidentally.
162    In support of its plea of invalidity, the applicant relies on the arguments raised and the facts put forward under the first five pleas in law in order to justify an interpretation of the benchmark for sintered ore which includes the installations at issue.
163    The applicant also states that its line of argument does not depend on the nature or number of challenges made by institutions other than the Commission in the course of the delegated regulation procedure or on the question whether reducing the number of allowances allocated to other producers if it were still possible at this stage. It should also be recalled that the Commission has accepted, in other cases, situations where operators changed benchmarks between the third and fourth phases of the ETS. It is also important to note that free allowances are intended to reward the most efficient installations in each sector.
164    The Commission contests the applicant’s arguments.
165    In this case and for the same reasons as those set out in relation to the various pleas in law put forward against the contested decision, it is necessary to reject the various arguments put forward to plead the inapplicability of Delegated Regulation 2019/331 in so far as it has as an annex a benchmark, that relating to sintered ore, which does not cover the installations at issue.
166    Accordingly, the sixth plea must be rejected and, consequently, the action must be dismissed in its entirety.
Costs
167    Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
168    Since the applicant has been unsuccessful, it must be ordered to bear its own costs and to pay those incurred by the Commission, in accordance with the form of order sought by the Commission.
169    In addition, under Article 138(1) of the Rules of Procedure, Member States which have intervened in the proceedings are to bear their own costs.
On those grounds,
THE GENERAL COURT (Second Chamber)
hereby:
1.      Dismisses the action;
2.      Orders Luossavaara-Kiirunavaara AB to bear its own costs and to pay those incurred by the European Commission;
3.      Orders the Kingdom of Sweden to bear its own costs.
Marcoulli
Frimodt Nielsen
Norkus
Delivered in open court in Luxembourg on 26 July 2023.
V. Di Bucci
G. De Baere
Registrar
President
Table of contents
Background to the dispute
Forms of order sought
Law
The first plea, alleging infringement of Annex I to Delegated Regulation 2019/331 and of Article 10a(1) of Directive 2003/87
Preliminary observations
The wording of the benchmark
The objectives of the legislation
The alleged direct substitutability between iron ore pellets and sintered ore
–
Direct substitutability of the products
–
The Ijmuiden installation and the applicant’s installations
The second plea, alleging infringement of the principle of equal treatment and non-discrimination
The third plea, alleging breach of the European Union’s international obligations and commitments
The fourth plea, alleging breach of the duty to examine carefully and impartially all the relevant aspects of the individual case
The fifth plea, alleging breach of the obligation to state reasons laid down in Article 296 TFEU
The sixth plea, alleging that Delegated Regulation 2019/331 is invalid
Costs
*      Language of the case: English.