Iberdrola, SA and Others v Administración del Estado and Others.
Date: 2013-10-17
27. As is apparent from its wording – according to which, during the period at issue, Member States are to allocate at least 95% of the emission allowances free of charge – Article 10 of Directive 2003/87 precludes charges imposed in respect of the allocation of allowances.
28. On the other hand, neither Article 10 nor any other provision of the directive concerns the use of emission allowances or expressly restricts the right of Member States to adopt measures which may affect the economic implications of using emission allowances.
29. Consequently, Member States are free, as a rule, to adopt economic policy measures, such as price controls on the markets for certain goods or essential resources, determining the manner in which the value of the emission allowances allocated free of charge to producers is to be passed on to consumers.
30. Nevertheless, the adoption of such measures must not neutralise the principle that emission allowances are allocated free of charge; nor may it undermine the objectives pursued by Directive 2003/87.
31. As regards the first aspect, it should be noted that the allocation ‘free of charge’ under Article 10 of Directive 2003/87 precludes not only the direct fixing of a price for the allocation of emission allowances but also the subsequent levying of a charge in respect of their allocation.
39. It should be noted, in that regard, that the allocation of emission allowances free of charge under Article 10 of Directive 2003/87 was not intended as a way of granting subsidies to the producers concerned, but of reducing the economic impact of the immediate and unilateral introduction by the European Union of an emission allowances market, by preventing a loss of competitiveness in certain production sectors covered by that directive.
40. As was stated in paragraph 9 above, insufficient competitive pressure to limit the extent to which the value of emission allowances is passed on in electricity prices has led electricity producers to make windfall profits. As can be seen from recitals 15 and 19 to Directive 2009/29, it is in order to eliminate windfall profits that, with effect from 2013, emission allowances are to be allocated by means of a full auctioning mechanism.
43. As regards that second aspect, it should be noted that the principal objective of Directive 2003/87 is to reduce greenhouse gas emissions substantially. That objective must be attained in compliance with a series of sub-objectives and through recourse to certain instruments. The principal instrument for that purpose is the EU scheme for greenhouse gas emissions trading. As indicated in recitals 5 and 7 to Directive 2003/87, among the other sub-objectives to be fulfilled by the scheme are the safeguarding of economic development and employment and the preservation of the integrity of the internal market and of conditions of competition (see, Case C‑505/09 P Commission v Estonia  [2012] ECR I‑0000, paragraph 79).
45. It should be noted, in the first place, that the allocation of emission allowances free of charge was a transitional measure intended to prevent undertakings from losing competitiveness as a result of the scheme for emission allowance trading. Accordingly, it is not directly related to the environmental objective of reducing emissions.
47. Undertakings may use their free emission allowances for their electricity production activities or they may sell them on the emission allowances market, depending on the value of those allowances on the market and the profits that they could accordingly yield.
49. First, in order to reduce greenhouse gas emissions, Directive 2003/87 introduced an emissions trading scheme. As provided in Article 1 of that directive, the incentive to reduce emissions is to be cost-effective and economically efficient, it being understood that the producer may decide to invest in more efficient technologies emitting less greenhouse gas, or to use more emission allowances, or even to scale back production, choosing the most economically advantageous option. In view of the fact that, under the rules at issue in the main proceedings, the value of emission allowances can be converted into money by selling them, it is clear that the rules do not have the effect of deterring electricity producers from reducing greenhouse gas emissions.
58. It follows that, although a levy lowering the remuneration for electricity production, such as that imposed by the rules at issue in the main proceedings, may diminish the incentive to reduce greenhouse gas emissions, it does not remove that incentive entirely.