BVerwG on Free Allocation of CO2 Emission Allowances to Power Plants

Today, the Federal Administrative Court in Leipzig (BVerwG) decided in four proceedings on the allocation of CO2 emission allowances under the Allocation Act 2012 (Zuteilungsgesetz). The court held that the cuts in free allowances for power plant operators comply with the statutory allocation requirements, the superseding EU regulations, and the German Constitution (Grundgesetz).

The applicants in the four proceedings (ref. no. 7 C 8.10, 7 C 9.10, 7 C 10.10, 7 C 11.10) were operators of power plants. They objected to the allocation decisions of the German Emissions Trading Authority (DEHSt) and requested additional allocation of free emission allowances. They complained that the cuts are only limited to power plants.

The Federal Administrative Court decided that differing free allocation of allowances to power plants and industrial facilities does not constitute a selective advantage for the industrial plants. The differentiation is justified by the nature and general scheme of the allocation system. Unlike the power plant operators, operators of industrial plants are exposed to competition on the world market and hence cannot easily price in the cost of acquisition for emission allowances. The pressure – resulting from a reduced allocation of free allowances – would therefore create a risk that industrial companies migrated away from the emission trading scheme. That would endanger the aim of emissions trading, in particular creating incentives to reduce greenhouse gas emissions.

BVerwG also ruled that the cuts do not violate the constitutional rights of the applicants.

Source: BVerwG

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