ETS does not discriminate against steel producers

Luxembourg - The European Court of Justice (ECJ) has dismissed a complaint by steel producers that the EU Emissions Trading Scheme (ETS) discriminated against their industry by excluding chemical and non-ferrous metal sectors from the initial scope of the ETS Directive.

Arcelor Atlantique et Lorraine and other industry parties had brought the action to the the Conseil d’État in France. They argued that the directive produces a difference in treatment between installations in the steel sector, which are subject to the greenhouse gas (GHG) emission allowance trading scheme, and the aluminium and plastics industries, which, although likewise emitting GHGs, are not subject to the scheme.

As it considered that the steel, plastics and aluminium sectors were in a comparable situation, the Conseil d’État put a question to the Court of Justice on whether the EU legislature breached the principle of equal treatment by treating comparable situations differently without justification.

In its ruling, the ECJ found that the different sources of GHG emissions relating to economic activities are in principle in a comparable situation, and all sectors of the economy which emit such gases can contribute to the functioning of the allowance trading scheme. The chemical and non-ferrous metal sectors, to which the plastics and aluminium sectors respectively belong, and the steel sector are therefore in a comparable position while being treated differently.

The Court pointed out that subjecting certain sectors to the allowance trading scheme involves, first, an obligation to apply to the competent national authorities for a permit to emit GHGs and, second, an obligation to surrender allowances equal to the total emissions from their installations during a specified period, or pay financial penalties.

While agreeing that the directive did leave steel producers, the Court decided that the different treatment of the steel sector on the one hand and the chemical and non-ferrous metal sectors on the other was nevertheless objectively justified by its requirements to protect the environment.

"The Community legislature could lawfully make use of a step-by-step approach for the introduction of the allowance trading scheme, and make provision for reviewing at reasonable intervals the measures adopted, in particular by gradually extending the scope of the directive," the ruling stated.

The legislature, it added, could "define the scope of the directive by excluding the chemical sector, which has an especially large number of installations, of the order of 34 000, whose inclusion would have made the management of the allowance trading scheme more difficult and increased the administrative burden, which could have endangered the functioning of the scheme when it was established."

The ECJ also noted that the difference in the levels of direct emissions – those of the non-ferrous metal sector amounted to 16.2 million tonnes of CO2 in 1990 while those of the steel sector were 174.8 million tonnes – was so substantial that the different treatment of those sectors may be regarded as justified.