Borealis AB and Others v Naturvårdsverket.
Date: 2016-09-08
32


As a preliminary point, it must be observed that, under the procedure laid down by Article 267 TFEU, providing for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the case before it. To that end, the Court may have to reformulate the questions referred to it. The Court may also find it necessary to consider provisions of EU law which the national court has not referred to in its questions (judgment of 11 February 2015, Marktgemeinde Straßwalchen and Others, C‑531/13, EU:C:2015:79, paragraph 37).
33


In that regard, it should be noted that it is clear from Article 3(u) of Directive 2003/87 that an installation that produces electricity for sale to third parties and in which none of the activities listed in Annex I to that directive, other than fuel combustion, have taken place must be classified as an electricity generator.
34


Since the waste gases were burned by electricity producers, the corresponding emissions were not taken into account for determining the maximum annual amount of allowances (see, in that regard, judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 74).
35


Similarly, it is clear from Article 10a(3) and (5) of Directive 2003/87 that the emissions generated by the production of heat produced in cogeneration were not taken into account for the purposes of determining the maximum annual amount of allowances in so far as they come from electricity generators (see, to that effect, judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 75).
36


Article 15(3) of Decision 2011/278 adopted to implement Article 10a(5) of Directive 2003/87, does not permit the taking into account of the emissions of electricity generators in determining the maximum annual amount of allowances (see, to that effect, judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 68).
39


The Court held in that judgment that, in not permitting the taking into account of the emissions of electricity generators in determining the maximum annual amount of allowances, Article 15(3) of Decision 2011/278 is consistent with the wording of Article 10a(5) of Directive 2003/87, read in conjunction with Article 10a(3) of that directive (see judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 68).
40


That interpretation is also consistent with the broad logic of Directive 2003/87 and the objectives which it pursues (judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 69).
45


In that regard, it should be noted that the Commission has a wide discretion to determine the benchmarks in individual sectors or sub-sectors under Article 10a(2) of Directive 2003/87. That exercise entails on its part, choices as well as complex technical and economic assessments. The legality of a measure adopted in that area can be affected only if the measure is manifestly inappropriate (see, by analogy, judgment of 22 December 2010, Gowan Comércio Internacional e Serviços, C‑77/09, EU:C:2010:803, paragraph 82).
46


According to recital 8 of Decision 2011/278, the Commission used, for the determination of benchmark values, as a starting point the arithmetic average of the greenhouse gas performance of the 10% most greenhouse gas efficient installations in 2007 and 2008 for which data were collected. It verified that the starting point sufficiently reflected the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass, and the capture and storage of carbon dioxide, where such facilities are available. Subsequently, the Commission supplemented those data by using, in particular, the data collected by or on behalf of the various European sector associations, based on defined rules, so-called ‘sector rule books’. As reference for these rule books, the Commission provided guidance on quality and verification criteria.
47


In addition, it is clear from recital 11 of Decision 2011/278 that, where no data were available or the data collected did not comply with the benchmarking methodology, information on present levels of emissions and consumptions and on most efficient techniques, mainly derived from the Reference Documents on Best Available Techniques (BREF) established in accordance with Directive 2008/1 was used to derive benchmark values. In particular, due to a lack of data on the treatment of waste gases, heat exports and electricity production, the values for the product benchmarks for coke and hot metal were derived from calculations of direct and indirect emissions based on information on relevant energy flows provided by the relevant BREF and default emission factors set out in Decision 2007/589.
48


As for waste gases generated during the production of hot metal, according to recital 32 of Decision 2011/278 the product benchmarks take account of the efficient energy recovery of waste gases and emissions related to use of those gases. To that end, for the determination of the benchmark values for products of which the production generates waste gases, the carbon content of those waste gases has been taken into account to a large extent.
49


In those circumstances it does not appear that the Commission, in determining the benchmarks according to Article 10a(2) of Directive 2003/87, exceeded the limits of its discretion.
52


In that regard, it should be noted that the Court has already held that since the Commission did not determine the maximum annual amount of allowances in accordance with the requirements of subparagraph (b) of Article 10a(5) of Directive 2003/87, the correction factor laid down in Article 4 of, and Annex II to, Decision 2013/448 is also contrary to that provision (judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 98).
53


In those circumstances, the answer to the fourth question is that Article 4 of, and Annex II to, Decision 2013/448 fixing the correction factor are invalid (judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 99).
60


In that regard, it must be noted that the first subparagraph of Article 10a(1) of Directive 2003/87 provides that the Commission must adopt Union-wide and fully-harmonised implementing measures for the allocation of allowances. According to subparagraph 2 of that article, the Commission is to determine in this context benchmarks by sector or subsector.
61


As is clear from Article 10(1) and (2) of Decision 2011/278, by multiplying those benchmarks with the level of historical activity of each sub-installation, Member States are to determine the preliminary annual number of emission allowances allocated free of charge. To this end, they are required to distinguish, in accordance with Article 6 of that decision, the sub-installations based on their activity, in order to determine whether it is necessary to apply a product benchmark, a heat benchmark, a fuel benchmark or a specific factor for process emissions installations.
62


In that regard, it should be noted that the definitions of product benchmark sub-installations, heat benchmark sub-installations, fuel benchmark sub-installations and process emissions sub-installations are mutually exclusive, as is clear from Article 3(b), (c), (d) and (h) of Decision 2011/278.
64


Article 3(c) of Decision 2011/278 defines heat benchmark sub-installations as inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production, the import from an installation or other entity covered by the Union scheme of measurable heat. This heat must, inter alia, be consumed for the production of products or exported to an installation or other entity not covered by the Union scheme with the exception of export for the production of electricity.
66


A ‘process emissions sub-installation’ is qualified as such with regard solely to the generation of specific types of emissions referred to in Article 3(h)(i) to (vi) of Decision 2011/278.
67


According to recital 12 of that decision where deriving a product benchmark has not been feasible, but greenhouse gases eligible for the free allocation of emission allowances occur, those allowances should be allocated on the basis of generic fallback approaches. To that end, a hierarchy of three fallback approaches has been developed in order to maximise greenhouse gas emission reductions and energy savings for at least parts of the production processes concerned.
68


In the light of those explanations, it follows from a combined reading of the definitions in Article 3(b), (c), (d) and (h) of that decision that it is only where a product benchmark cannot be applied to a sub-installation that the allocation of free allowances must occur on the basis of one of the other three options, namely the heat benchmark, the fuel benchmark or the process emissions.
70


Under Article 6(2) of Decision 2011/278 the sum of the inputs, outputs and emissions of each sub-installation is not to exceed the inputs, outputs and total emissions of the installation. Furthermore, the first subparagraph of Article 7(7) of the decision provides that the operators of installations producing greenhouse gases are required when communicating baseline data, to ensure that ‘there are no overlaps between sub-installations and no double counting’. This obligation on operators corresponds to that on Member States, under Article 10(8) of Decision 2011/278, to ensure that ‘emissions are not double counted’.
71


Thus, in so far as the heat imported by a heat benchmark sub-installation comes from a fuel benchmark sub-installation, it is necessary to avoid emissions actually related to the production of that heat being taken into account twice in the allocation of free allowances. The application of the fuel benchmark to heat production and the heat benchmark to the consumption of that heat would result in double counting which is precluded by the provisions listed in the preceding paragraph.
72


That interpretation of Decision 2011/278 is supported by specific monitoring rules for emissions from combustion processes contained in Annex IV, point (1A) of Regulation No 601/2012, which provide, in particular, that ‘[t]he operator shall not assign emissions associated with the production of heat or electricity that is imported from other installations to the importing installation’.
73


That interpretation is also consistent with the main objective of Directive 2003/87, which is to protect the environment by means of a reduction of greenhouse gas emissions (see judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 79) and the objective set out in recital 18 of Decision 2011/278 which requires Member States to ensure no double counting and double allocation in order to avoid any distortion of competition and to ensure an orderly functioning of the carbon market.
97


It should be noted that the Court has already held it is apparent from recital 32 of Decision 2011/278 that, pursuant to the third subparagraph of Article 10a(1) of Directive 2003/87, the Commission took account of emissions which are related to the efficient energy recovery of waste gases. The Commission adapted, to that end, certain product benchmarks, namely those for coke, hot metal and sintered ore. It thereby seeks to encourage undertakings to reuse or sell the waste gases generated during the manufacture of those products. It is further apparent from recital 32 of Decision 2011/278, first, that their reuse, in another process by an industrial installation, results, in principle, in the entitlement to additional free allowances on the basis of the heat or fuel benchmark and, second, that the sale of such gases allows the producer to save on allowances (see, to that effect, judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 73).
102


This interpretation of the second indent of Article 3(c), and Article 10, paragraph 2(b) of Decision 2011/278 corresponds to the objective of Article 10a(1) of Directive 2003/87 to incentivise the reduction of greenhouse gas emissions by improving energy efficiency, by taking account of the most efficient techniques, including, in particular, the fullest energy recovery from gas waste.
105


In this regard, it appears from the document entitled ‘Guidance Document No 8 on the harmonised free allocation methodology for the EU-ETS post 2012, Waste gases and process emissions sub-installation’, published on the Commission website, as in the case of waste gases generated within a product benchmark sub-installation, that that benchmark includes the allocation of allowances for emissions related to the production of waste gases and their safety flaring. According to the same document, for the purpose of allocating emission allowances related to the production of waste gases, emissions exceeding those generated during the combustion of natural gas are taken into account.
112


In this regard, as has been found at paragraph 105 above, it appears from the document entitled ‘Guidance Document No 8 on the harmonized free allocation methodology for the EU-ETS post 2012, Waste gases and process emissions sub-installation’, as in the case of waste gases generated within a product benchmark sub-installation, that that benchmark includes, inter alia, the allocation of allowances for emissions related to the production of waste gases and that, for the purpose of allocating those emission allowances, emissions exceeding those generated during the combustion of natural gas are taken into account.
116


In that regard, it has been found, in paragraph 64 above, that Article 3(c) of Decision 2011/278 defines heat benchmark sub-installations as inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production, the import from an installation or other entity covered by the Union scheme of measurable heat. That heat must, inter alia, be consumed for the production of products or exported to an installation or other entity not covered by the Union scheme with the exception of the export for the production of electricity.
117


It is clear from this definition that an installation which exports the heat which it produces can be allocated allowances for that heat when it exports the heat ‘to an installation or other entity not covered by the Union scheme’. However, it cannot claim an allowance allocation for this heat when it transfers the heat to another installation subject to the emissions trading scheme.