OPINION OF ADVOCATE GENERAL

MENGOZZI

delivered on 16 May 2013 ( 1 )

Case C‑203/12

Billerud Karlsborg AB,

Billerud Skärblacka AB

v

Naturvårdsverket

(Request for a preliminary ruling from the Högsta domstolen (Sweden))

‛Greenhouse gas emission allowances trading scheme in the Community — Obligation for an operator who does not surrender sufficient allowances to cover its emissions by 30 April of each year to pay a penalty irrespective of the cause of the failure to surrender — Absence of pollution above the permitted amount — Impossibility of waiving or reducing the amount of the penalty — Proportionality’

1. By this request for a preliminary ruling, the referring court invites the Court to clarify the system of penalties relating to infringements of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, ( 2 ) and, more specifically, to infringement by an operator of the obligation to surrender, by 30 April of the relevant year, allowances equal to the total emissions from that installation during the preceding calendar year.

I – Legal context

A – Directive 2003/87

2. Directive 2003/87 establishes, under Article 1, ‘a scheme for greenhouse gas emission allowance trading within the Community … in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner’.

3. The scheme is organised in the following manner. Member States develop, on an individual basis, a national plan stating the total quantity of allowances that they intend to allocate for the relevant period and how they propose to allocate them. ( 3 ) Each national plan is then published and notified to the European Commission and to the other Member States. ( 4 ) For the period from 1 January 2005 to 31 December 2007, the Member States must allocate at least 95% of the allowances free of charge. ( 5 )

4. On the basis of those national plans, each Member State ‘shall decide upon the total quantity of allowances it will allocate … and the allocation of those allowances to the operator of each installation’. ( 6 ) Those allocations are transferrable ( 7 ) and must be surrendered each year, therefore ‘Member States shall ensure that, by 30 April each year at the latest, the operator of each installation surrenders a number of allowances equal to the total emissions from that installation during the preceding calendar year as verified in accordance with Article 15, and that these are subsequently cancelled’. ( 8 )

5. In order to ensure compliance with the requirements of Directive 2003/87, ‘Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that such rules are implemented. The penalties provided for must be effective, proportionate and dissuasive’. ( 9 ) Article 16(3) of Directive 2003/87 lays down the penalties for non-surrender and provides that ‘Member States shall ensure that any operator who does not surrender sufficient allowances by 30 April of each year to cover its emissions during the preceding year shall be held liable for the payment of an excess emissions penalty’. ( 10 ) For the period from 1 January 2005 to 1 December 2007, the Member States must impose, in relation to excess emissions, a penalty of EUR 40 for each tonne of carbon dioxide equivalent emitted by an installation for which the operator has not surrendered allowances. ( 11 ) In any event, payment of the penalty is not to release the operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year. ( 12 )

B – Swedish law

6. Law No 1199 of 2004 on emission allowance trading (Lag om handel med utsläppsrätter, 2004:1199) (‘Law on emission allowance trading’) transposed Directive 2003/87 into Swedish law. In the version applicable at the material time, it provided that an operator had to determine or measure its emissions of carbon dioxide and submit a verified report on those emissions every year. ( 13 ) The report on emissions for the preceding year must be submitted to the Naturvårdsverket (Swedish environmental protection agency) at the latest by 31 March of the following calendar year. ( 14 ) Then, by 30 April each year at the latest, the operator must surrender to the Statens energimyndighet (Swedish energy agency) responsible for administering the registry the number of allowances equal to the total emissions of each installation during the preceding calendar year. ( 15 ) An operator who does not surrender sufficient allowances to cover its emissions has to pay a penalty on the excess emissions in the amount of EUR 40 for each tonne of carbon dioxide emitted by the installation and for which the operator has not surrendered allowances. ( 16 ) Payment of the penalty does not release an operator from its obligation to surrender a number of allowances equal to its excess emissions when surrendering allowances in relation to the following calendar year. ( 17 )

II – The dispute in the main proceedings and the questions referred

7. Billerud Karlsborg AB and Billerud Skärblacka AB are two companies governed by Swedish law which hold carbon dioxide emissions permits. In calendar year 2006, they emitted 10828 and 42433 tonnes of carbon dioxide respectively. It is common ground that those companies had, in their trading accounts, emission allowances corresponding to their actual emissions in 2006.

8. However, no allowances were surrendered by those companies on 30 April 2007. Therefore, the trading accounts of the two companies were blocked by the authority responsible for administering the registry and the allowances equal to the total emissions from that installation during calendar year 2006 had to be surrendered before 30 April 2008, at the same time as the allowances equal to the total emissions from that installation by the two companies during 2007.

9. As a result of that infringement of the obligation on operators to surrender allowances by 30 April at the latest, on 10 December 2007 the Naturvårdsverket also imposed a penalty of SEK 3 959 366 on Billerud Karlsborg AB and of SEK 15 516 051 on Billerud Skärblacka AB. Those companies brought a legal action against the decisions imposing penalties at first instance and then on appeal, without success.

10. Before the referring court, they brought an appeal on a point of law and a complaint of a serious procedural irregularity, arguing that they had, in their respective accounts on 30 April 2007, allowances equivalent to actual emissions in 2006 and that the surrender which they both intended to undertake had been prevented by internal administrative failures. They thus consider that the provisions of the Law on emission allowance trading were not actually infringed and that there is therefore no legal basis for imposing the two penalties. Even if the decisions imposing the penalties should not be regarded as having no legal basis, the two appellants ask the referring court to reduce the amount of the financial penalties to SEK 0 or SEK 20 000, or to a reasonable amount, in so far as the penalties imposed, totalling nearly SEK 20 million, are disproportionate, since it is common ground that those companies have not emitted more than they were permitted to emit. They argue in that regard that, since the penalties imposed are comparable to a criminal charge, a strict application of the rules on penalties provided for in the Law on emission allowance trading, without possibility of reduction, would be contrary to Article 6 of the European Convention on the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950.

11. The referring court points out, for its part, that the provisions concerning penalties for non-surrender by 30 April laid down by the Law on emission allowance trading are based directly on Directive 2003/87, which provides that a penalty of EUR 40 per tonne of carbon dioxide is to be imposed on operators which have not surrendered sufficient allowances by 30 April. The referring court has doubts as to whether such a penalty, the principle for which is laid down in Article 16(3) and (4) of Directive 2003/87, is to be imposed only in the case of excess emissions or whether it must also be imposed where it is established that an operator had sufficient allowances but simply failed to surrender them. Moreover, because of the references made by Directive 2003/87 to fundamental rights ( 18 ) and to the principle of proportionality, ( 19 ) the national court asks whether it is possible, while complying with the requirements of that directive, to reduce the amount of the penalties imposed.

12. Thus faced with a difficulty in interpreting European Union law, the Högsta domstolen (Supreme Court) (Sweden) decided to stay the proceedings and, by order for reference received at the Court Registry on 30 April 2012, to refer the following two questions to the Court for a preliminary ruling under Article 267 TFEU: ‘(1) Does Article 16(3) and (4) of Directive 2003/87 … mean that an operator who has not surrendered a sufficient number of emission allowances by 30 April must pay a penalty irrespective of the cause of the omission, for example, where, although the operator had a sufficient number of emission allowances on 30 April, as a result of an oversight, an administrative error or a technical problem it did not surrender them then? (2) If Question 1 is answered in the affirmative, does Article 16(3) and (4) of Directive 2003/87 mean that the penalty will or may be waived or reduced for example in the circumstances described in Question 1?’

III – Procedure before the Court

13. The two appellants in the main proceedings, the Naturvårdsverket, the Greek Government and the Commission have submitted written observations to the Court.

IV – Legal analysis

14. In order to answer the questions from the referring court, I would like to take a moment to clarify the logic underlying the trading scheme established by Directive 2003/87. Then, I shall endeavour to consider in particular, in the light of Article 16(3) and (4) of that directive, the situation of an operator who does not surrender sufficient allowances because he does not hold a sufficient number of them and has not obtained them on the market as compared with the situation of an operator who infringes the obligation to surrender laid down by Directive 2003/87 although it has a sufficient number of allowances to cover its emissions. It will follow from this that the legal basis for the penalties imposed in the main proceedings is not Article 16(3) and (4) of Directive 2003/87, but Article 16(1) thereof, and a new problem will emerge, concerning the proportionality of those penalties, which will require the formulation of a few concluding remarks.

A – The logic underlying the trading scheme established by Directive 2003/87

15. The adoption of Directive 2003/87 constitutes the embodiment in European Union law of the commitment made by the Community and the Member States on the international stage to participate in a collective effort for the rationalisation and reduction of greenhouse gas emissions responsible for environmentally harmful climate change. ( 20 ) In order more effectively to achieve an 8% reduction in emissions of greenhouse gases by 2008 to 2012 compared to 1990 levels. ( 21 ) Directive 2003/87 provides for the establishment, in stages, of an ‘efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment’. ( 22 )

16. In essence, the greenhouse gas emission allowance trading scheme within the European Union may be described as follows.

17. Every installation whose activities fall within the scope of Directive 2003/87 ( 23 ) must, from 1 January 2005, hold a greenhouse gas emissions permit. ( 24 ) That permit is issued only where the competent national authority is satisfied that the operator responsible for the installation in question ‘is capable of monitoring and reporting emissions’. ( 25 )

18. At the same time, the Member States prepare, on an individual basis, a national plan for the allocation of allowances for each period laid down in Directive 2003/87 ( 26 ) determining the total quantity of allowances allocated for the relevant period. ( 27 ) For the three-year period beginning 1 January 2005 – that during which the two penalties at issue in the main proceedings were imposed – the Member States therefore had to determine the total quantity of allowances allocated and the allocation of those allowances to the operator of each installation. ( 28 ) Each year, a proportion of the total quantity of allowances determined for the entire period is issued to operators by 28 February at the latest. ( 29 )

19. Emissions must be monitored ( 30 ) by operators and each operator must, to that end, report the emissions from its installation to the competent authority. ( 31 ) That report on emissions for the preceding calendar year must be verified by a verifier who is independent of the operator ( 32 ) and the competent national authority must be kept informed. ( 33 ) If it appears that the report on emissions relating to the preceding calendar year has not been verified as satisfactory, the Member States must ensure that the operator in question cannot make further transfers of allowances. ( 34 )

20. By 30 April each year at the latest, each operator of an installation must surrender allowances, that is to say surrender a number of allowances equal to the total emissions from that installation during the preceding calendar year. ( 35 ) That obligation to surrender allowances each year is also set out for the operator in the greenhouse gas emissions permit. ( 36 ) That surrender precedes the final stage which is that of cancelling the allowances issued and then actually used. ( 37 )

21. The scheme for greenhouse gas emission allowance trading is characterised by a very salient accounting logic. ( 38 ) Moreover, a registry is maintained at national level, which comprises separate accounts for registering the allowances held, issued or transferred by each person concerned. ( 39 ) Maintaining that strict accounting is particularly necessary since, ultimately, compliance by operators with their obligations under the trading scheme also determines compliance by the Member States and the European Union at the community and international level with the commitment which they made substantially to reduce aggregate anthropogenic emissions of greenhouse gases. ( 40 )

22. The proper functioning of the scheme is guaranteed by provision of the penalties laid down by Article 16 of Directive 2003/87. In a conventional way, paragraph 1 thereof provides that Member States are to lay down the rules on penalties applicable in the case of infringement of the national provisions adopted pursuant to that directive. The penalties provided for by the Member States must be ‘effective, proportionate and dissuasive’.

23. The Member States have no freedom to choose the penalties applicable in the event of infringement of the obligation to surrender ‘sufficient’ allowances, which are laid down by Directive 2003/87 itself.

24. First, Member States are required to publish the name of any operator who is in breach of the obligation to ‘surrender sufficient allowances’. ( 41 ) Secondly, those States are also required to impose a penalty on each operator who has not surrendered, by 30 April of each year, ‘sufficient allowances … to cover its emissions during the preceding year’. ( 42 ) The penalty is presented, under Articles 16(3) and (4) of Directive 2003/87, as an ‘excess emissions penalty’. The legislature has itself fixed the amount of that penalty. Accordingly, for the 2005‑2008 period, ‘Member States shall apply a[n] … excess emissions penalty of EUR 40 for each tonne of carbon dioxide equivalent emitted by that installation for which the operator has not surrendered allowances’. ( 43 ) It is further stated that ‘[p]ayment of the excess emissions penalty shall not release the operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year’. ( 44 )

B – The polymorphous nature of infringement of the obligation to surrender allowances

25. It is clear from the wording of Article 16(3) and (4) of Directive 2003/87 that the penalty is intended as an ‘excess emissions penalty’ and the amount fixed by the legislature applies ‘for each tonne of carbon dioxide equivalent emitted by that installation for which the operator has not surrendered allowances’. The questions of the referring court address specifically the question whether the penalty should be imposed under the same conditions on an operator who, though not responsible for emissions above the permitted amount, none the less has not formally surrendered allowances within the meaning of Article 12(3) of Directive 2003/87, with the result that each tonne of carbon dioxide equivalent emitted for which no allowances were surrendered by 30 April, although they were held, must be subject to the penalty fixed by that directive.

26. In that regard, the Naturvårdsverket, the Greek Government and the Commission argue, in essence, as follows. The penalty mechanism provided for in Article 16(3) and (4) of Directive 2003/87 guarantees the uniform, effective and transparent application of that directive. Given the fundamental objective pursued by that directive, namely protection of the environment, and the fact that the proper functioning of the trading scheme depends on the discipline of each stakeholder, the penalty is applicable irrespective of whether or not the operator held a number of allowances equal to actual emissions. Since Article 16(3) and (4) of Directive 2003/87 constitutes a lex specialis in relation to Article 16(1) of that directive, the penalty which it imposes ought to be strictly applied and the penalty provided for should, in the public interest, be imposed in the same way on a failure to surrender in good time a sufficient number of allowances to cover emissions and on a breach of emission allowances. The concept of ‘excess emissions’ within the meaning of Article 16(3) and (4) of that directive should be understood as referring to any allowances, whether held or not, which are not surrendered within the time-limits.

27. I must admit that I have some difficulty in following such a line of argument. Although I readily understand the importance, for the trading scheme as a whole, of compliance by each of the players with their obligations under Directive 2003/87, I nevertheless remain of the opinion that infringement of the obligation to surrender is not of the same severity where it is recognised and established that an operator holds a sufficient number of allowances and where, on the contrary, an operator is responsible for excessive emissions, above those permitted by the number of allowances held. Under such circumstances, the application of the same penalty in the case of two infringements of Directive 2003/87 which are very distinct in nature and scope appears problematic. I am of the opinion that literal and teleological analyses of Article 16(3) and (4) of that directive confirm that a distinction must be drawn between those two situations.

28. Indeed, from a literal standpoint, it must be recognised that the wording of Article 16(3) and (4) of Directive 2003/87 is not without ambiguities. However, since the entire scheme is based on the premise that operators are holders of an emissions permit and that, as a result of that permit, a number of allowances has been allocated to them, it appears that ‘excess emissions’ within the meaning of that article necessarily refers to emissions which are not covered by an allowance which is allocated and held. It also follows from the wording of that article that the penalty applies to ‘any operator who does not surrender sufficient allowances … to cover its emissions during the preceding year’ ( 45 ) although it could have restricted itself to referring to ‘any operator who does not surrender’. It must be deduced from that detail that the penalty imposed under that article does not penalise infringement of the obligation to surrender per se, but rather infringement of the obligation to surrender arising from the fact that an operator does not hold sufficient allowances to cover its emissions and has not obtained them on the market, with the consequence that that operator is responsible for excess emissions understood as meaning unauthorised emissions.

29. That literal interpretation is supported by a teleological analysis. Accordingly, the travaux préparatoires for Directive 2003/87 reveal that the objective pursued by the penalty provided for by Article 16(3) and (4) of that directive is to ensure that ‘the penalties for non-compliance are sufficiently high to ensure that it makes no sense for an operator not to go out and buy from the market a sufficient number of allowances to cover the installation’s actual emissions’. ( 46 ) Accordingly, the amount of the penalty was determined by the legislature in accordance with the estimated price of the allowance in order to encourage operators to buy on the market. ( 47 )

30. However, the situation in the main proceedings is atypical in that it is undisputed that, for 2007, the two companies on which a penalty was imposed held a far greater number of allowances than the amount of actual emissions. It was therefore not necessary for them to seek to acquire on the market any required allowances. The incentive of the penalty provided for in that article therefore tends to confirm that that provision covers the situation of an operator who has not surrendered sufficient allowances to cover its emissions because it has not obtained the allowances it requires on the market. It is that type of particularly wrongful behaviour which must be subject to a significant penalty and to which the penalty under Article 16(3) and (4) of Directive 2003/87 must apply.

31. However, although the failure to surrender in good time undoubtedly constitutes a disruption to the scheme, on account of the strictness of the accounting logic underlying it, it must be remembered that those companies were not guilty of any additional pollution and that it has not been established that, in the case of those two companies, the late surrender was caused by a proven intention to circumvent the scheme, to speculate on the market and/or to profit in a way likely to distort competition, ( 48 ) particularly since, according to the appellants in the main proceedings, their trading accounts were quickly blocked by the authority responsible for administering the registry. ( 49 ) However, under Article 16(2) of Directive 2003/87, the penalty is also accompanied by publication of the names ‘of operators who are in breach of requirements to surrender sufficient allowances’. This method, based on naming and shaming, applied in the context of that directive, makes sense only if it applies to operators who are guilty of emissions above the permitted amount and who disregard the rules of the market, that is to say, who fail to obtain the required allowances on the market and who have thereby jeopardised attainment of the objective pursued by that directive. It is clear in this case that publication of the names of the two appellants in the main proceedings, which is the corollary of the penalty provided for in Article 16(3) and (4) of Directive 2003/87, would be manifestly undeserved on account of the elements which I have just set out.

32. It follows from the foregoing that Article 16(3) and (4) of Directive 2003/87 must be interpreted as meaning that it does not cover the situation of an infringement of the obligation to surrender by an operator who actually has a sufficient number of allowances on 30 April of the relevant year to cover its emissions during the preceding year and who is therefore not responsible for any pollution above the permitted amount. It follows from that finding that the second question raised by the national court is irrelevant in resolving the dispute in the main proceedings.

33. That finding does not mean, however, that the infringement of the obligation to surrender for which the appellants in the main proceedings are responsible should remain unpunished, but simply means that the penalty for failure, by an operator who has a sufficient number of allowances to cover its emissions during the preceding year, to surrender those allowances by 30 April has not been harmonised by the EU legislature and is left to the discretion of Member States. The legal basis for the imposition of the two penalties at issue in the main proceedings is therefore not Article 16(3) and (4) of Directive 2003/87 but Article 16(1) of that directive.

34. However, Article 16(1) of Directive 2003/87 requires Member States to provide for a system of penalties which is proportionate. In view of the circumstances, it will be useful to address a number of observations to the referring court, which, in order to resolve the dispute in the main proceedings, must naturally ask whether the provision of Swedish law on the basis of which the two penalties were imposed meets that requirement of proportionality.

C – Final remarks on the proportionality of the penalties at issue in the main proceedings

35. The legal basis of the two penalties imposed on the appellants in the main proceedings is therefore Article 16(1) of Directive 2003/87. According to that article, it is for the Member States to lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to that directive and those penalties must be effective, proportionate and dissuasive.

36. In the absence of overall harmonisation of the rules on penalties for infringements of the rules laid down by Directive 2003/87, considerable leeway must be conferred on the Member States. ( 50 ) It is clear, moreover, from the settled case-law that, ‘in the absence of harmonisation of European Union legislation in the field of penalties applicable where conditions laid down by arrangements under that legislation are not complied with, Member States are empowered to choose the penalties which seem to them to be appropriate. They must, however, exercise that power in accordance with European Union law and its general principles, and consequently in accordance with the principle of proportionality’. ( 51 ) Accordingly, such penalties must ‘not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued by the legislation in question’ and ‘the disadvantages caused must not be disproportionate to the aims pursued’. ( 52 ) Member States are required to comply with the principle of proportionality, moreover, ‘not only as regards the determination … of the rules concerning the severity of fines, but also as regards the assessment of the factors which may be taken into account in the fixing of a fine’. ( 53 )

37. The application of Chapter 8, paragraph 6 of the Law on emission allowance trading to the appellants in the main proceedings must therefore be intended as the penalty applied by the competent Swedish authority for infringement of the obligation to surrender by an operator who had, on 30 April of the relevant year, a sufficient number of allowances to cover its emissions during the preceding year and who is responsible for no pollution above the permitted amount. Each of those companies was thus required to pay a penalty, of a significant amount (SEK 3 959 366 and SEK 15 516 051 respectively) applied automatically, without prior notice, and – it seems – without possibility of adjustment, for each tonne of carbon dioxide equivalent emitted during the preceding year. However, the European Union legislature insisted on stating not only that Directive 2003/87 respects fundamental rights ( 54 ) but also that the establishment of the market in greenhouse gas emission allowances must entail ‘the least possible diminution of economic development and employment’. ( 55 )

38. The competent Swedish authority therefore brought the rules on penalties in line with those provided for in Article 16(3) and (4) of Directive 2003/87. Such an alignment, by virtue of its highly punitive nature, aims to contribute to attainment of the objective legitimately pursued by Directive 2003/87 of protecting the environment by reducing, in due course, anthropogenic emissions of greenhouse gases and deterring any behaviour which disrupts the trading scheme established by that directive. Under those circumstances, the imposition of a penalty necessarily seems appropriate for attaining the objective pursued by the legislation of the European Union.

39. However, it is necessary to ask whether it does not go beyond the limits of what is necessary for attaining the objectives legitimately pursued. In that regard, I shall limit myself to clarifying the most salient elements of the penalty mechanism provided for in Chapter 8, paragraph 6 of the Law on emission allowance trading.

40. I would point out, therefore, that it does not appear from the case-file that any notice or reminder was addressed to the two appellants in the main proceedings before the penalties were imposed. However, a less restrictive measure may readily be envisaged. ( 56 ) Moreover, the automatic and immediate nature of the imposition of the penalty precludes any examination or any consideration of the circumstances of the case in question although, first, an administrative or technical failure was the cause of infringement of the obligation imposed by the directive, secondly, no pollution above the permitted amount was caused nor any wrongful act actually established and, thirdly, it is clear from the case-file – subject to verification by the referring court – that, in order to rectify their situation, the appellants in the main proceedings had, as early as 14 May 2007, contacted the authority responsible for administering the registry, which authority had already proceeded to block their trading accounts.

41. Subject to verification by the referring court, it may be found that the application of Chapter 8, paragraph 6 of the Law on emission allowance trading to the appellants in the main proceedings, which is particularly strict, ultimately proves to be disproportionate to the disturbance caused to the trading scheme.

42. Accordingly, it follows from the foregoing that, in circumstances such as those in the main proceedings, the requirement of proportionality referred to in Article 16(1) of Directive 2003/87 precludes a penalty mechanism such as that provided for by Chapter 8, paragraph 6 of the Law on emission allowance trading in that it applies, under the same conditions, automatically, immediately and without consideration of the circumstances, to an operator who has not complied with the obligation to surrender although it had a sufficient number of allowances to cover its emissions and was not responsible for any pollution above the permitted amount.

V – Conclusion

43. In view of the foregoing considerations, I suggest that the Court reply as follows to the questions referred by the Högsta domstolen for a preliminary ruling: Article 16(3) and (4) of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC must be interpreted as meaning that it does not cover the situation of an infringement of the obligation to surrender by an operator who actually has a sufficient number of allowances on 30 April of the relevant year to cover its emissions during the preceding year and who is not responsible for any pollution above the permitted amount. Article 16(1) of Directive 2003/87 constitutes the legal basis for the penalty for infringement of the obligation to surrender by an operator, which, it is established, holds a sufficient number of allowances to cover its emissions during the preceding year and is not responsible for any pollution above the permitted amount. In circumstances such as those in the main proceedings, the requirement of proportionality referred to in Article 16(1) of Directive 2003/87 must be interpreted as meaning that it precludes, subject to the necessary factual verifications by the referring court, a penalty mechanism such as that provided for by Chapter 8, paragraph 6 of Law No 1199 of 2004 on emission allowance trading (Lag om handel med utsläppsrätter, 2004:1199) (Law on emission allowance trading) in that it has been applied, under the same conditions, automatically, immediately and without consideration of the circumstances, to an operator who has not complied with the obligation to surrender although it had a sufficient number of allowances to cover its emissions and was not responsible for any pollution above the permitted amount.

( 1 ) Original language: French.

( 2 ) OJ 2003 L 275, p. 32.

( 3 ) First subparagraph of Article 9(1) of Directive 2003/87.

( 4 ) Second subparagraph of Article 9(1) of Directive 2003/87.

( 5 ) Article 10 of Directive 2003/87.

( 6 ) Article 11(1) of Directive 2003/87.

( 7 ) Article 12(1) of Directive 2003/87.

( 8 ) Article 12(3) of Directive 2003/87.

( 9 ) Article 16(1) of Directive 2003/87.

( 10 ) Article 16(3) of Directive 2003/87.

( 11 ) Article 16(4) of Directive 2003/87.

( 12 ) Article 16(4) in fine of Directive 2003/87.

( 13 ) Chapter 5, paragraph 1 of the Law on emission allowance trading. An operator who has not submitted the verified report by 31 March of the following year must pay a late-payment penalty of SEK 20000 unless that penalty is manifestly unjustified. The amount of that penalty, although it cannot be reduced, may be waived (see Chapter 8, paragraph 5a of the Law on emission allowance trading).

( 14 ) Chapter 5, paragraph 1 of the Law on emission allowance trading.

( 15 ) Chapter 6, paragraph 1 of the Law on emission allowance trading.

( 16 ) Chapter 8, paragraph 6 of the Law on emission allowance trading. The equivalent in SEK is fixed in Chapter 8, paragraph 6, third subparagraph of the Law on emission allowance trading.

( 17 ) Chapter 8, paragraph 7 of the Law on emission allowance trading.

( 18 ) See recital 27 of Directive 2003/87.

( 19 ) See recital 30 and Article 16(1) of Directive 2003/87.

( 20 ) See Case C-127/07 Arcelor Atlantique et Lorraine and Others [2008] ECR I-9895, paragraphs 28 et seq.

( 21 ) Recital 2 in the preamble to Directive 2003/87.

( 22 ) Recital 5 in the preamble to Directive 2003/87.

( 23 ) Although this is not relevant to the present case, I would point out that that scope was recently extended by Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (OJ 2009 L 140, p. 63).

( 24 ) Articles 4 and 5 of Directive 2003/87.

( 25 ) Article 6(1) of Directive 2003/87.

( 26 ) Article 11 of Directive 2003/87.

( 27 ) Article 9 of Directive 2003/87.

( 28 ) Articles 10 and 11(1) of Directive 2003/87.

( 29 ) Article 11(4) of Directive 2003/87.

( 30 ) Article 14(2) of Directive 2003/87.

( 31 ) Article 14(3) of Directive 2003/87.

( 32 ) First paragraph of Article 15 of Directive 2003/87 and Annex V thereto.

( 33 ) First paragraph of Article 15 of Directive 2003/87.

( 34 ) Second paragraph of Article 15 of Directive 2003/87. With regard to the transferable nature of allowances see Article 12(1) of that directive.

( 35 ) Article 12(3) of Directive 2003/87. The surrender procedure is governed by Article 52 et seq. of Commission Regulation (EC) No 2216/2004 of 21 December 2004 for a standardised and secured system of registries pursuant to Directive 2003/87 and Decision No 280/2004/EC of the European Parliament and of the Council (OJ 2004 L 386, p. 1).

( 36 ) Article 6(2)(e) of Directive 2003/87.

( 37 ) Article 12(3) in fine of Directive 2003/87.

( 38 ) Article 19(1) of Directive 2003/87.

( 39 ) Article 19 of Directive 2003/87.

( 40 ) See recital 4 in the preamble to Directive 2003/87.

( 41 ) Article 16(2) of Directive 2003/87.

( 42 ) Article 16(3) of Directive 2003/87.

( 43 ) Article 16(4) of Directive 2003/87. The amount of the penalty was thus fixed at a lower level during the ‘learning’ period (that is to say the 2005-2008 period).

( 44 ) Article 16(4) in fine of Directive 2003/87.

( 45 ) Emphasis added.

( 46 ) Point 17 in the explanatory memorandum for the proposal for a directive of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (COM(2001) 581 final).

( 47 ) See the proposal for a directive cited above (p. 47).

( 48 ) In that regard, it should be noted that a drastic reduction in the number of allowances allocated by Member States would be a radical way to guard against any speculative temptation to which operators may be subject and at the same time to ensure a benefit for the environment (see Arcelor Atlantique et Lorraine and Others, paragraph 31). Accordingly, it is clear from the case-file that, on 30 April 2007 – that is, it is true, in the course of the learning period for the scheme – Billerud Karlsborg AB and Billerud Skärblacka AB, respectively, held 66705 allowances (including 10828 subject to the obligation to surrender) and 178405 allowances (including 42433 subject to the obligation to surrender).

( 49 ) According to the statements of the appellants in the main proceedings, the trading accounts were blocked as from a date between 1 and 14 May 2007.

( 50 ) See, by analogy, Case C‑505/09 P Commission v Estonia [2012] ECR, paragraph 53.

( 51 ) Case C‑210/10 Urbán [2010] ECR, paragraph 23 and the case-law cited.

( 52 ) Urbán, paragraph 24 and the case-law cited.

( 53 ) See, by analogy, Urbán, paragraph 54.

( 54 ) Recital 27 in the preamble to Directive 2003/87.

( 55 ) Recital 5 in the preamble to Directive 2003/87.

( 56 ) Regarding imposition of the penalty provided for by Article 16(3) and (4) of Directive 2003/87, French law, for example, provides that the competent authority must give an operator in breach of the obligation to surrender a sufficient number of allowances to cover its emissions during the preceding year formal notice to meet that obligation within a period of one month (Article L. 229-18, paragraph II of the French Environmental Code).