Contents
Judgment of the Court (Fifth Chamber)25 November 2021note(Reference for a preliminary ruling — Scheme for greenhouse gas emission allowance trading — Scheme for the free allocation of allowances — Decision 2011/278/EU — Article 3(d) — Fuel benchmark sub-installation — Concepts of combustion and fuel — Primary copper production by flash smelting — Request for allocation — Allowances requested and not yet allocated on the date of expiry of a trading period — Possibility of issuing such allowances during the subsequent trading period by way of enforcement of a judicial decision given after that date)In Case C‑271/20,REQUEST for a preliminary ruling under Article 267 TFEU from the Verwaltungsgericht Berlin (Administrative Court, Berlin, Germany), made by decision of 11 June 2020, received at the Court on 19 June 2020, in the proceedingsAurubis AGvBundesrepublik Deutschland,THE COURT (Fifth Chamber),composed of E. Regan, President of the Chamber, K. Lenaerts, President of the Court, acting as Judge of the Fifth Chamber, C. Lycourgos (Rapporteur), President of the Fourth Chamber, I. Jarukaitis and M. Ilešič, Judges,Advocate General: G. Hogan,Registrar: M. Krausenböck, Administrator,having regard to the written procedure and further to the hearing on 19 May 2021,after considering the observations submitted on behalf of:– Aurubis AG, by S. Altenschmidt and D. Helling, Rechtsanwälte,– Bundesrepublik Deutschland, by J. Steegmann and A. Leskovar, acting as Agents,– the European Commission, by B. De Meester, C. Hermes and G. Wils, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 24 June 2021,gives the following
Judgment
1This request for a preliminary ruling concerns the interpretation, first, of Article 3(d) of Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council (OJ 2011 L 130, p. 1) and, second, of the temporal scope of that decision in respect of the third trading period (2013 to 2020).
2The request has been made in proceedings between Aurubis AG and the Bundesrepublik Deutschland (Federal Republic of Germany), represented by the Umweltbundesamt, Deutsche Emissionshandelsstelle (Federal Environment Agency, German Emissions Trading Authority, ‘the DEHSt’), relating to greenhouse gas emission allowances (‘the emission allowances’) to be allocated to Aurubis for free in respect of its primary copper production activity.
Legal context
EU law
Directive 2003/87
3Directive 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 (OJ 2003 L 275, p. 32), in the version applicable when Decision 2011/278 was adopted and which is relevant for the purpose of examining the first question, includes the amendments made by Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87 so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (OJ 2009 L 140, p. 63) (‘Directive 2003/87’).
4Directive 2003/87 was subsequently amended again on numerous occasions, including by Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October 2015 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and amending Directive 2003/87 (OJ 2015 L 264, p. 1) and by Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 2003/87 to enhance cost-effective emission reductions and low-carbon investments, and Decision 2015/1814 (OJ 2018 L 76, p. 3). Article 10(1), Article 10a(5) and (7), and Article 13 of Directive 2003/87, in the version as amended by Directive 2018/410, are relevant for the purpose of examining the second question. The wording of the other provisions of Directive 2003/87, as cited below, was already in force when Decision 2011/278 was adopted and is still in force today.
5Article 1 of Directive 2003/87, headed ‘Subject matter’, provides, in the first paragraph:‘This Directive establishes a scheme for greenhouse gas emission allowance trading … in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’
6Article 2 of that directive, headed ‘Scope’, provides, in paragraph 1:‘This Directive shall apply to emissions from the activities listed in Annex I and greenhouse gases listed in Annex II.’
7Article 3 of that directive, headed ‘Definitions’, states:‘For the purposes of this Directive the following definitions shall apply:…(t) “combustion” means any oxidation of fuels, regardless of the way in which the heat, electrical or mechanical energy produced by this process is used, and any other directly associated activities, including waste gas scrubbing;…’
8Article 10 of that directive, headed ‘Auctioning of allowances’, provides, in paragraph 1, in the version as amended by Directive 2018/410:‘From 2019 onwards, Member States shall auction all allowances that are not allocated free of charge in accordance with Articles 10a and 10c of this Directive and that are not placed in the market stability reserve established by Decision [2015/1814] or cancelled ……’
9Article 10a of Directive 2003/87, headed ‘Transitional Union-wide rules for harmonised free allocation’, provides, in paragraph 1:‘…The [harmonised measures adopted by the European Commission for free allocation of allowances] shall, to the extent feasible, determine Union-wide ex-ante benchmarks so as to ensure that allocation takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of the most efficient techniques ……’
10Further, Article 10a(5) and (7), in the version as amended by Directive 2018/410, provides:5. In order to respect the auctioning share set out in Article 10, for every year in which the sum of free allocations does not reach the maximum amount that respects the auctioning share, the remaining allowances up to that amount shall be used to prevent or limit reduction of free allocations to respect the auctioning share in later years. Where, nonetheless, the maximum amount is reached, free allocations shall be adjusted accordingly. ……7. Allowances from the maximum amount referred to in paragraph 5 of this Article which were not allocated for free by 2020 shall be set aside for new entrants, together with 200 million allowances placed in the market stability reserve pursuant to Article 1(3) of Decision [2015/1814]. Of the allowances set aside, up to 200 million shall be returned to the market stability reserve at the end of the period from 2021 to 2030 if not allocated for that period.From 2021, allowances that pursuant to paragraphs 19 and 20 are not allocated to installations shall be added to the amount of allowances set aside in accordance with the first sentence of the first subparagraph of this paragraph.…’
11Article 13 of Directive 2003/87, headed ‘Validity of allowances’, provides, in the version as amended by Directive 2018/410:‘Allowances issued from 1 January 2013 onwards shall be valid indefinitely. Allowances issued from 1 January 2021 onwards shall include an indication showing in which ten-year period beginning from 1 January 2021 they were issued, and be valid for emissions from the first year of that period onwards.’
12Article 19 of Directive 2003/87, which is headed ‘Registries’, provides, in paragraph 1:‘Allowances issued from 1 January 2012 onwards shall be held in the [Union] registry for the execution of processes pertaining to the maintenance of the holding accounts opened in the Member State and the allocation, surrender and cancellation of allowances …’
13Article 20 of that directive, headed ‘Central Administrator’, provides, in paragraph 1:‘The Commission shall designate a Central Administrator to maintain an independent transaction log recording the issue, transfer and cancellation of allowances.’
14Annex I to that directive contains a table listing the categories of activities to which the directive applies. They include the ‘production or processing of non-ferrous metals, including production of alloys, refining, foundry casting, etc., where combustion units with a total rated thermal input (including fuels used as reducing agents) exceeding 20 [megawatts (MW)] are operated’.
15Annex II to that directive lists the greenhouse gases covered. It includes, inter alia, carbon dioxide (CO2).
Directive 2009/29
16According to recital 37 of Directive 2009/29:‘In order to clarify the coverage of all kinds of boilers, burners, turbines, heaters, furnaces, incinerators, calciners, kilns, ovens, dryers, engines, fuel cells, chemical looping combustion units, flares, and thermal or catalytic post-combustion units by Directive [2003/87], a definition of “combustion” should be added.’
Decision 2011/278
17Recitals 1, 12 and 18 of Decision 2011/278 stated:(1) Article 10a of [Directive 2003/87] requires that the [Union-wide] and fully harmonised implementing measures for the allocation of free emission allowances should, to the extent feasible, determine ex-ante benchmarks so as to ensure that the free allocation of emission allowances takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass and capture and storage of carbon dioxide, where such facilities are available, and should not provide incentives to increase emissions. Allocations must be fixed prior to the trading period so as to enable the market to function properly.…(12) Where deriving a product benchmark was not 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. 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. The heat benchmark is applicable for heat consumption processes where a measurable heat carrier is used. The fuel benchmark is applicable where non-measurable heat is consumed. … For process emissions, emission allowances should be allocated on the basis of historical emissions. ……(18) In order to avoid any distortion of competition and to ensure an orderly functioning of the carbon market, Member States should ensure that when determining the allocation of individual installations no double counting and no double allocation takes place. In this context, Member States should pay particular attention to cases where a benchmarked product is produced in more than one installation, where more than one benchmarked product is produced in the same installation or where intermediate products are exchanged across installation boundaries.’
18Article 3 of that decision, headed ‘Definitions’, stated:‘For the purposes of this Decision, the following definitions shall apply:…(b) “product benchmark sub-installation” means inputs, outputs and corresponding emissions relating to the production of a product for which a benchmark has been set in Annex I;(c) “heat benchmark sub-installation” means 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, or both, of measurable heat which is:– consumed within the installation’s boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, 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;(d) “fuel benchmark sub-installation” means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production of non-measurable heat by fuel combustion consumed for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, including safety flaring;(e) “measurable heat” means a net heat flow transported through identifiable pipelines or ducts using a heat transfer medium, such as, in particular, steam, hot air, water, oil, liquid metals and salts, for which a heat meter is or could be installed;…(g) “non-measurable heat” means all heat other than measurable heat;(h) “process emissions sub-installation” means greenhouse gas emissions listed in Annex I to Directive [2003/87] other than [CO2], which occur outside the system boundaries of a product benchmark listed in Annex I, or [CO2] emissions, which occur outside the system boundaries of a product benchmark listed in Annex I, as a result of any of the following activities and emissions stemming from the combustion of incompletely oxidised carbon produced as a result of the following activities for the purpose of the production of measurable heat, non-measurable heat or electricity provided that emissions that would have occurred from the combustion of an amount of natural gas, equivalent to the technically usable energy content of the combusted incompletely oxidised carbon, are subtracted:(i) the chemical or electrolytic reduction of metal compounds in ores, concentrates and secondary materials;(ii) the removal of impurities from metals and metal compounds;(iii) the decomposition of carbonates, excluding those for flue gas scrubbing;(iv) chemical syntheses where the carbon bearing material participates in the reaction, for a primary purpose other than the generation of heat;(v) the use of carbon containing additives or raw materials for a primary purpose other than the generation of heat;(vi) the chemical or electrolytic reduction of metalloid oxides or non-metal oxides such as silicon oxides and phosphates;…’
19Article 6 of that decision, headed ‘Division into sub-installations’, provided:1.For the purposes of this Decision, Member States shall divide each installation eligible for the free allocation of emission allowances under Article 10a of Directive [2003/87] into one or more of the following sub-installations, as required:(a) a product benchmark sub-installation;(b) a heat benchmark sub-installation;(c) a fuel benchmark sub-installation;(d) a process emissions sub-installation.Sub-installations shall correspond, to the extent possible, to physical parts of the installation.…2. The sum of the inputs, outputs and emissions of each sub-installation shall not exceed the inputs, outputs and total emissions of the installation.’
20Decision 2011/278 was repealed with effect from 1 January 2021 by Commission Delegated Regulation (EU) 2019/331 of 19 December 2018 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87 (OJ 2019 L 59, p. 8).
21However, according to Article 27 of that delegated regulation, that decision is to continue to apply to allocations relating to the period prior to 1 January 2021.
Regulation (EU) No 389/2013.
22Article 4 of Commission Regulation (EU) No 389/2013 of 2 May 2013 establishing a Union Registry pursuant to Directive 2003/87, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations (EU) No 920/2010 and No 1193/2011 (OJ 2013 L 122, p. 1), headed ‘Union Registry’, provided:1. A Union Registry for the trading period of the Union emissions trading scheme commencing on 1 January 2013 and subsequent periods is established.2. The central administrator shall operate and maintain the Union Registry, including its technical infrastructure.3. Member States shall use the Union Registry for the purposes of meeting their obligations under Article 19 of Directive [2003/87] and … to ensure accurate accounting of allowances ……’
23Under Article 6 of that regulation, headed ‘European Union transaction log’:1. A European Union Transaction Log (EUTL), to take the form of a standardised electronic database, is established, pursuant to Article 20 of Directive [2003/87], for transactions within the scope of this Regulation. …2. The central administrator shall operate and maintain the EUTL ……’
24Article 16 of that regulation, headed ‘Opening operator holding accounts in the Union Registry’, provided:1. Within 20 working days of the entry into force of a greenhouse gas emissions permit, the relevant competent authority or the operator shall provide the relevant national administrator with the information [required] and shall request the national administrator to open an operator holding account in the Union Registry.2. Within 20 working days of the receipt of a complete set of [that] information …, the national administrator shall open an operator holding account for each installation in the Union Registry or inform the prospective account holder of the refusal to open the account …’
25Article 41 of the same regulation, headed ‘Creation of allowances’, stated, in paragraph 1:‘The central administrator may create an EU Total Quantity Account, an EU Aviation Total Quantity Account, an EU Auction Account, an EU Aviation Auction Account, an EU Credit Exchange Account and an EU International Credit Account as appropriate, and shall create or cancel accounts and allowances as made necessary by acts of Union law …’
26Article 43 of Regulation No 389/2013, headed ‘Transfer of general allowances to be allocated free of charge’, provided:‘The central administrator shall, in a timely manner, transfer general allowances from the EU Total Quantity Account into the EU Allocation Account in a quantity corresponding to the sum of the allowances allocated free of charge according to the national allocation tables of each Member State.’
27Under Article 51 of that regulation, headed ‘Entry of national allocation tables into the EUTL’:1. Each Member State shall notify its national allocation table for the period 2013-2020 to the Commission by 31 December 2012. …2. The Commission shall instruct the central administrator to enter the national allocation table into the EUTL if it considers that the national allocation table is in conformity with Directive [2003/87], Decision [2011/278] and decisions adopted by the Commission pursuant to Article 10c(6) of Directive [2003/87]. …’
28Article 52 of that regulation, headed ‘Changes to the national allocation tables’, stated:1.The national administrator shall carry out changes to the national allocation table in the EUTL where:(a) an installation’s permit has been revoked or has otherwise expired;(b) an installation ceased operations;(c) an installation was split into two or more installations;(d) two or more installations were merged into one installation.2.A Member State shall notify the Commission of changes to its national allocation table, concerning:(a) allocations to new entrants or allocations to new entrants following significant capacity extensions;(b) partial cessations of operations and significant capacity reductions;(c) allocation free of charge pursuant to Article 10c of Directive [2003/87] that is justified in the light of advancement of the investments that have been undertaken and reported to the Commission pursuant to Article 10c(1) of that Directive;(d) any other change not referred to in paragraph 1.On receiving a notification pursuant to the first subparagraph, the Commission shall instruct the central administrator to make the corresponding changes to the national allocation table held in the EUTL if it considers that the changes to the national allocation table are in conformity with Directive [2003/87], Decision [2011/278] and decisions adopted by the Commission in accordance with Article 10c(6) of Directive [2003/87]. It shall otherwise reject the changes within a reasonable period and inform the Member State concerned without delay, stating its reasons and setting out criteria to be fulfilled for a subsequent notification to be accepted.’
29Article 53 of that regulation, headed ‘Free allocation of general allowances’, provided:1. The national administrator shall indicate in the national allocation table for each operator, for each year and for each legal basis …, whether or not an installation should receive an allocation for that year.2. From 1 February 2013, the central administrator shall ensure that the Union Registry transfers general allowances automatically from the EU Allocation Account in accordance with the relevant national allocation table to the … operator holding account ……’
30Regulation No 389/2013 was repealed, with effect from 1 January 2021, by Commission Delegated Regulation (EU) 2019/1122 of 12 March 2019 supplementing Directive 2003/87 as regards the functioning of the Union Registry (OJ 2019 L 177, p. 3).
31However, under the second paragraph of Article 88 of that delegated regulation, Regulation No 389/2013 is to continue to apply until 1 January 2026 to all operations required in relation to the third trading period (2013 to 2020).
Decision 2015/1814
32Under recital 7 of Decision 2015/1814:‘… Accordingly, in order to avoid an imbalanced market situation of supply of allowances at the end of one trading period and the beginning of the next with possibly disruptive effects for the market, provision should be made for the auctioning of part of any large increase of supply at the end of one trading period in the first two years of the next period. In order to further enhance the stability of the European carbon market and to avoid artificially increasing supply towards the end of the trading period which started in 2013, allowances not allocated to installations pursuant to Article 10a(7) of Directive [2003/87] and allowances not allocated to installations because of the application of Article 10a(19) and (20) of that Directive (“unallocated allowances”), should be placed in the reserve in 2020. …’
33Article 1 of that decision, headed ‘Market stability reserve’, provides:1. A market stability reserve shall be established in 2018 and the placing of allowances in the reserve shall operate from 1 January 2019.…3. Allowances not allocated to installations pursuant to Article 10a(7) of Directive [2003/87] and allowances not allocated to installations because of the application of Article 10a(19) and (20) of that Directive shall be placed in the reserve in 2020. ……’
German law
34Paragraph 9(1) of the Treibhausgas-Emissionshandelsgesetz (Law on greenhouse gas emissions trading) of 21 July 2011 (BGBl. 2011 I, p. 1475), in the version applicable to the dispute in the main proceedings, provides:‘Installation operators shall receive an allocation of free allowances in accordance with the principles laid down in Article 10a … of Directive [2003/87] … in the version in force at the relevant time and in … Decision [2011/278].’
35Paragraph 2 of the Verordnung über die Zuteilung von Treibhausgas-Emissionsberechtigungen in der Handelsperiode 2013 bis 2020 (Regulation on the allocation of greenhouse gas emission allowances in the 2013 to 2020 trading period) of 26 September 2011 (BGBl. 2011 I, p. 1921), in the version applicable to the dispute in the main proceedings (‘the ZuV 2020’), defines, in subparagraphs 27 and 29 thereof, the concepts ‘fuel benchmark sub-installation’ and ‘process emissions benchmark sub-installation’ in terms similar to those of Article 3(d) and (h) of Decision 2011/278.
The dispute in the main proceedings and the questions referred for a preliminary ruling
36Aurubis operates an installation in Hamburg (Germany) which produces primary copper. Since that activity falls within the category of activities referred to in Annex I to Directive 2003/87 and described as the ‘production or processing of non-ferrous metals … where combustion units with a total rated thermal input … exceeding 20 MW are operated’, Aurubis is obliged to participate in the greenhouse gas emission trading scheme (‘the ETS’).
37The installation concerned comprises two sub-installations, Rohhüttenwerk Nord and Rohhüttenwerk Ost. The dispute in the main proceedings relates to the activity of only the latter.
38Rohhüttenwerk Ost is a foundry in which primary copper is obtained by flash smelting copper concentrate using the ‘Outokumpu’ process.
39The copper concentrate used in that foundry is mainly composed of copper, sulphur and iron. It also contains traces of carbon and other substances. In order to obtain primary copper, that copper concentrate is first mixed with sand and other fine material. The preparation thus obtained is placed in the flash smelting furnace with a mixture of air and oxygen. Because of the chemical reaction between oxygen and, in particular, sulphurous substances contained in the copper concentrate, the temperature in the furnace exceeds 1200 °C, which in turn leads to the liquidation of the copper concentrate. The substances thus obtained are matte (which is a mixture of copper sulphide and iron sulphide), iron silicate and sulphur dioxide (SO2). Subsequently, the matte is inserted into a converter, into which the remaining fractions of sulphur and iron are oxidised. Heat is also produced at this point. The product of that stage is placed in an anode furnace, in which the remaining fractions of sulphur are transformed into SO2. This is how the final product, primary copper, is ultimately obtained.
40Rohhüttenwerk Ost emits CO2 into the atmosphere due to the presence of carbon, which constitutes approximately 0.7% of the copper concentrate used. The foundry emits approximately 29000 tonnes of CO2 per year.
41In response to a request made by Aurubis on 20 January 2012 for the allocation of allowances for that foundry, the DEHSt, by decision of 17 February 2014, allocated 2596999 free emission units to Aurubis for the third trading period (2013 to 2020).
42By decision of 3 April 2018, in response to an objection by Aurubis, the DEHSt revoked in part its decision of 17 February 2014, in so far as it had allocated a quantity of allowances in excess of 1784398 units. The DEHSt gave as its reason the fact that primary copper production from copper concentrate could not be taken into account in the context of a ‘fuel benchmark sub-installation’, but had to be attached to a ‘process emissions sub-installation’.
43On 30 April 2018, Aurubis brought an action against that decision of 3 April 2018 before the referring court. It claims that the free allocation of emission allowances should have been based on Paragraph 2(27) of the ZuV 2020 and Article 3(d) of Decision 2011/278. Primary copper production by flash smelting does not fall within any of the activities referred to in Paragraph 2(29) of the ZuV 2020 or in Article 3(h) of Decision 2011/278.
44According to the DEHSt, in order for a sub-installation to constitute a ‘fuel benchmark sub-installation’, the primary purpose of the use of a material must be the production of heat. Copper concentrate is a raw material, and the primary purpose of its use is primary copper production. Furthermore, complete combustion of that concentrate does not occur, contrary to what is required in order for the fuel benchmark to apply. Moreover, ‘fuels’, within the meaning of Article 3(d) of Decision 2011/278, are fuels which can be replaced with other fuels, in particular natural gas. It is not possible to replace the copper concentrate in that way.
45The DEHSt also observes that the coverage of Aurubis’s requirements for emission allowances is, at approximately 130%, already excessive and that, if the number of allowances to be allocated to Aurubis were to be calculated on the basis of the fuel benchmark, that undertaking would obtain coverage of approximately 220% of its requirements and could thus sell a substantial portion of the allowances allocated.
46The referring court notes that, if it were to be concluded that Rohhüttenwerk Ost is a ‘fuel benchmark sub-installation’, that would amount to classifying the copper concentrate or, at the very least, the sulphur that it contains, as a ‘fuel’.
47That court notes that the Court held, in paragraph 53 of the judgment of 20 June 2019, ExxonMobil Production Deutschland (C‑682/17, EU:C:2019:518), that Article 3(t) of Directive 2003/87 does not reduce the concept of ‘combustion’ solely to oxidation reactions which generate a greenhouse gas themselves. That interpretation by the Court is not, however, necessarily decisive for the purpose of interpreting the scope of the concept of ‘fuel’ within the meaning of Article 3(d) of Decision 2011/278.
48In the light of the reasons given in the allocation decision adopted by the DEHSt, it is necessary to determine whether an allocation on the basis of the fuel benchmark requires, as that authority maintains, the primary purpose of the combustion to be the production of heat, given that, in the present case, the copper concentrate used is both a raw material and a fuel. It is also necessary to clarify whether Article 3(d) of Decision 2011/278 refers only, as the DEHSt also claims, to the combustion of fuels which are interchangeable with other fuels.
49Additionally, the referring court is uncertain what the consequences are of the fact that the third trading period expired on 31 December 2020. It states that, according to German case-law, the end of the first and second trading periods meant that entitlements to an allowance that had not yet been allocated on 30 April following the expiry of the trading period concerned lapsed, since there was no express transitional provision in German law. There is also no transitional provision in German law in respect of the third trading period.
50None of the relevant EU acts contains a provision concerning compensation for entitlements across several periods. Moreover, no specific reserve of allowances was set aside in anticipation of court decisions. That said, there may be an indication in favour of the argument that the transition from the third to the fourth period does not cause entitlements to the allocation of allowances not yet made to lapse on 31 December 2020 in the form of Decision 2015/1814, which requires certain allowances not allocated by 31 December 2020 to be placed in a reserve.
51In those circumstances, the Verwaltungsgericht Berlin (Administrative Court, Berlin, Germany) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) Are the requirements of Article 3(d) of [Decision 2011/278] for a free allocation of emission allowances on the basis of a fuel benchmark sub-installation fulfilled where, in an installation for the production of non-ferrous metals in accordance with Annex I to Directive [2003/87], a sulphur-containing copper concentrate is used in a flash smelting furnace to produce primary copper and the non-measurable heat required to melt the copper ore contained in the concentrate is produced essentially through oxidation of the sulphur contained in the concentrate, meaning that the copper concentrate is used both as a source of raw material and as a combustible material to generate heat?(2) If the answer to Question 1 is in the affirmative:Can entitlements to a further free allocation of emission allowances for the third trading period be met after the end of the third trading period with entitlements for the fourth trading period where the existence of the allowance entitlement is established by a court only after expiry of the third trading period, or do allowance entitlements that have not yet been met lapse on expiry of the third trading period?’
Consideration of the questions referred
The first question
52By its first question, the referring court asks, in essence, whether Article 3(d) of Decision 2011/278 must be interpreted as meaning that the concept of a ‘fuel benchmark sub-installation’ covers, within an installation producing primary copper and whose activity falls within Annex I to Directive 2003/87, a flash smelting foundry that causes sulphur present in the raw material used to be oxidised, that raw material being a copper concentrate.
53It should be noted that Decision 2011/278 establishes harmonised rules for the allocation of free emission allowances and was adopted by the Commission under Article 10a of Directive 2003/87. With regard to installations in certain sectors of activity, that article provides for the allocation of such emission allowances, the quantity of which is to decrease gradually over the third trading period (2013 to 2020), with a view to reaching the complete abolition of free allowances in 2027 (see, to that effect, judgment of 3 December 2020, Ingredion Germany, C‑320/19, EU:C:2020:983, paragraphs 41 and 43).
54In the present case, it is not disputed that the primary copper production installation operated by Aurubis comes under that transitional scheme for the free allocation of emission allowances.
55As regards the third trading period, which is the only period at issue in the main proceedings, it was for the DEHSt, for the purposes of determining the number of free emission allowances to be allocated to Aurubis, to divide, in accordance with Article 6 of Decision 2011/278, that installation into one or more ‘sub-installations’ corresponding, as far as possible, to the physical parts of that installation.
56To that end, that decision provided for four categories of sub-installation, listed in Article 6 and defined in Article 3(b), (c), (d) and (h) of that decision. Those categories of sub-installation – namely ‘product benchmark sub-installations’, ‘heat benchmark sub-installations’, ‘fuel benchmark sub-installations’ and ‘process emissions sub-installations’ respectively – were mutually exclusive, in the sense that one single activity could fall within only one of those categories (see, to that effect, judgment of 8 September 2016, Borealis and Others, C‑180/15, EU:C:2016:647, paragraphs 62 and 69).
57Furthermore, in accordance with recital 12 of Decision 2011/278, the list of ‘heat benchmark’, ‘fuel benchmark’ and ‘process emissions’ sub-installation categories, known as ‘fallback approaches’ – which are applicable in cases where it had not been possible to calculate a ‘product benchmark’, but where greenhouse gas emissions eligible for the free allocation of emission allowances occur – are hierarchical in nature (see, to that effect, judgment of 8 September 2016, Borealis and Others, C‑180/15, EU:C:2016:647, paragraphs 67 and 68). The category of ‘process emissions sub-installations’ was only the final fallback option (judgment of 18 January 2018, INEOS, C‑58/17, EU:C:2018:19, paragraph 36).
58It was therefore for the DEHSt, before classifying a sub-installation as a ‘process emissions sub-installation’, first to ascertain whether there was a ‘product benchmark’ for that sub-installation and, if that was not the case, to examine whether the relevant industrial production equipment of the installation at issue fell within the concept of a ‘heat benchmark sub-installation’ or that of a ‘fuel benchmark sub-installation’.
59It is apparent from the request for a preliminary ruling that the foundry at issue in the main proceedings uses a copper concentrate that contains sulphur as a raw material. The sulphur present in that concentrate is oxidised, successively, in a flash smelting furnace, in a converter and in an anode furnace. The heat thus produced is not measurable and causes the copper ore present in that concentrate to melt, which gives rise to the final product: primary copper. Since the same concentrate also contains carbon, that foundry emits CO2 into the atmosphere.
60It follows that that foundry produces heat which is not covered by the concept of ‘measurable heat’, within the meaning of Article 3(e) of Decision 2011/278, but by that of ‘non-measurable heat’ referred to in Article 3(g) of that decision, and that that heat is consumed in the manufacture of a product, namely primary copper, for which no benchmark is defined in Annex I to Decision 2011/278.
61Therefore, such a foundry does not fall within either the concept of a ‘product benchmark sub-installation’ or that of a ‘heat benchmark sub-installation’.
62Since, in the present case, the DEHSt has decided that the Rohhüttenwerk Ost foundry is covered by the concept of ‘process emissions sub-installation’, within the meaning of Article 3(h) of Decision 2011/278, while Aurubis maintains that that foundry falls within the concept of a ‘fuel benchmark sub-installation’, within the meaning of Article 3(d) of that decision, it is necessary to determine whether the definition set out in that provision – which takes precedence, where it is applicable, over that definition in Article 3(h) – covers such a foundry.
63In that regard, turning to the question whether, in a foundry with the characteristics referred to in paragraph 59 above, the heat is produced ‘by fuel combustion’, within the meaning of Article 3(d) of that decision, the referring court wishes, in essence, to ascertain whether the DEHSt was entitled to conclude that those words relate only to the complete combustion of fuels which do not come from the raw material used and which may, in the sub-installation at issue in the main proceedings, be replaced by other fuels, such as natural gas.
64In that regard, it should be noted that, as the Advocate General observed in points 42 to 44 of his Opinion, neither Article 3(t) of Directive 2003/87 nor Article 3(d) of Decision 2011/278 limit the scope of the concepts of ‘combustion’ and ‘fuels’ in such a way.
65Since the EU legislature stated, by the definition provided in Article 3(t) of Directive 2003/87, that the concept of ‘combustion’ generally covers ‘any oxidation of fuels’, it cannot be found that combustion, within the meaning of that directive and the acts adopted on the basis of that directive, takes place only where a fuel is oxidised in its entirety.
66Such a restrictive interpretation would be inconsistent with the intention of the legislature as expressed in recital 37 of Directive 2009/29. As is apparent from that recital, the purpose of the insertion of Article 3(t) into Directive 2003/87 was to ‘clarify’ that the concept of ‘combustion’ has a particularly wide scope, covering the activity of ‘all kinds of boilers, burners, turbines, heaters, furnaces, incinerators, calciners, kilns, ovens, dryers, engines, fuel cells, chemical looping combustion units, flares, and thermal or catalytic post-combustion units’. No provision adopted since then by the EU legislature or by the Commission, pursuant to its delegated powers, gives reason to believe that the word ‘combustion’ covers only reactions that involve the complete oxidation of each component of the inputs that are subject to the activity of that industrial production equipment.
67As the word ‘fuel’ has similarly not been defined restrictively by that legislature or by the Commission, pursuant to its delegated powers, the legislation on the ETS cannot be applied in such a way as to remove from the scope of the words ‘fuel combustion’ the combustion of fuels which are present in a raw material with a lower carbon content than that of other materials more frequently used and which cannot, in a given technological process, be replaced by such a material with a higher carbon content.
68It is not apparent from Directive 2003/87 or Decision 2011/278 that the application of the transitional scheme for free allocation of emission allowances must be limited to activities which use a material with a high carbon content and thus generate amounts of emissions exceeding a certain threshold. Nor do those provisions state that combustion must be excluded from the fuel benchmark where the substances used as fuels are present in the raw material used in the industrial activity concerned.
69The scope of the definition in Article 3(d) of Decision 2011/278 cannot be limited, when it is interpreted, through the addition of requirements or exclusions which are not mentioned therein and which cannot be inferred from other provisions of that decision or from Directive 2003/87. Such an approach would run counter to the principle of legal certainty, according to which EU law must allow those concerned to know unequivocally what their rights and obligations are and to take steps accordingly (see, to that effect, judgment of 3 June 2021, Jumbocarry Trading, C‑39/20, EU:C:2021:435, paragraph 48 and the case-law cited).
70As the Advocate General noted, moreover, in point 48 of his Opinion, which refers to Article 10a(1) of Directive 2003/87 and recital 1 of Decision 2011/278, the scheme for the free allocation of emission allowances is intended to incentivise reductions in greenhouse gas emissions and energy efficient techniques. The profit that can be derived from selling allowances that have been allocated, but no longer have to be returned where the operator concerned has reduced its emissions by investing in innovative techniques, forms an integral part of that incentive (see, to that effect, judgment of 12 April 2018, PPC Power, C‑302/17, EU:C:2018:245, paragraph 27). Therefore, the fact that, as a result of such investments, that operator makes a greater profit from allowances received free of charge on the basis of the criteria laid down in the applicable legislation does not undermine the objective of the ETS.
71Consequently, in the absence of any clarification to the contrary in Decision 2011/278, the words ‘fuel combustion’ in Article 3(d) thereof must be applied in accordance with their meaning laid down in Article 3(t) of Directive 2003/87, which covers any oxidation of fuels. Since it is common ground that, in a foundry such as the one at issue in the main proceedings, the non-measurable heat is essentially produced by oxidation of sulphur-containing substances present in a concentrate which has been inserted into a furnace, it must be held that the activity of that foundry consists of ‘the production of non-measurable heat by fuel combustion consumed for the production of products’ within the meaning of Article 3(d).
72As regards, lastly, the question whether inputs, outputs and corresponding emissions from such a foundry ‘relate to’ the production of non-measurable heat consumed for the production of products, it should be noted that those words also cannot be interpreted in such a way as to add, to the definition given by the Commission, a substantive condition which that definition does not lay down.
73In the light of the use of those words, Article 3(d) of Decision 2011/278 cannot be interpreted as requiring, for the purposes of applying the fuel benchmark, that the production of non-measurable heat constitutes a ‘purpose’, or indeed the ‘primary purpose’, of the activity concerned.
74On the contrary, it is apparent from the wording of that provision that it covers, inter alia, sub-installations whose purpose is the production of a product or the production of energy and which, to that end, consume non-measurable heat. The production of that heat is, consequently, not the purpose of the sub-installations concerned, but rather the necessary means of fulfilling that purpose.
75The requirement, contained in the definition laid down in Article 3(d) of Decision 2011/278, that inputs, outputs and corresponding emissions must ‘relate to’ the production of non-measurable heat by fuel combustion which is consumed for the production of products, means that there must be an operational link between those inputs, outputs and emissions, on the one hand, and that combustion, on the other. Subject to the verifications to be carried out by the referring court, it appears that, in the light of the way in which the foundry at issue in the main proceedings functions, as described in the request for a preliminary ruling, there is such a link between the copper concentrate concerned, as input, and the combustion producing non-measurable heat, as well as between that combustion and the outputs and emissions from that foundry.
76If it were to be found by the referring court that the number of free emission allowances to which Aurubis was entitled during the third trading period (2013 to 2020) must be corrected, it would be important, in the context of that correction, to take account of the number of allowances that have already been allocated to it, so as to ensure, in accordance with recital 18 and Article 6(2) of Decision 2011/278, that no activity carried out in the installation at issue in the main proceedings is counted twice.
77In the light of all of the findings above, the answer to the first question is that Article 3(d) of Decision 2011/278 must be interpreted as meaning that the concept of a ‘fuel benchmark sub-installation’ covers, within an installation producing primary copper and whose activity falls within Annex I to Directive 2003/87, a flash smelting foundry that causes sulphur present in the raw material used to be oxidised, that raw material being a copper concentrate.
The second question
78By its second question, the referring court asks, in essence, whether Decision 2011/278 must be interpreted as meaning that free allowances to which the operator of an installation is entitled in respect of the third trading period (2013 to 2020) may still be issued to that operator after 31 December 2020 by way of enforcement of a judicial decision given after that date.
79In that regard, it must be recalled that every person with a right or freedom guaranteed by EU law which has been infringed has the right to an effective remedy before a tribunal (see, to that effect, judgment of 20 April 2021, Repubblika, C‑896/19, EU:C:2021:311, paragraph 40 and the case-law cited).
80Consequently, where an applicant for the free allocation of emission allowances for the third trading period (2013 to 2020) has challenged, in good time and correctly, the decision of the competent national authority that sets the amount of such allowances to be allocated, that applicant must be able to assert its rights, even if it is only after that period has expired that the national court hearing the case in question finds that that authority incorrectly applied EU legislation on the ETS. Otherwise, once a judicial decision can no longer be given during the relevant trading period, that applicant would be deprived of its right to an effective remedy.
81As regards whether, in such circumstances, the right to an allocation in respect of the third trading period can still be satisfied by issuing free allowances following the judicial decision given after the expiry of that period, it should be noted that the rules on the ETS do not permit allowances in respect of the fourth trading period to be issued for that purpose. The latter allowances, which are referred to in the second sentence of Article 13 of Directive 2003/87, must, in accordance with the wording of that provision, be issued under a trading period after 31 December 2020 and are valid only for emissions generated from the first year of that new period onwards.
82On the other hand, that legislation does not preclude the competent authority from paying out free allowances in respect of the third trading period which are still available, by any means provided for by law, by way of enforcement of a judicial decision establishing an entitlement to the allocation of such allowances, into the holding account of the operator of the installation concerned. The fact that, in such a situation, those allowances are delivered after 31 December 2020 does not prevent them from being classified as ‘allowances issued from 1 January 2013 onwards’ within the meaning of the first sentence of Article 13 of Directive 2003/87. Since, under that provision, those allowances are valid for an indefinite period of time, the competent authority may pay them out into that holding account in order to enforce a judicial decision.
83That interpretation is borne out by Delegated Regulation 2019/331, which entered into force on 1 January 2021, Article 27 of which states that Decision 2011/278 is to continue to apply to allocations relating to the period prior to 1 January 2021. As follows from that article, it is important that, after the expiry of the third trading period, Decision 2011/278 does not cease to produce its legal effects in respect of that period.
84Moreover, the provisions of the legislation on the ETS relating specifically to (i) the accounts, register and the EUTL and (ii) the national allocation tables allow an allocation for the third trading period to be corrected after 31 December 2020 and make it possible to issue further allowances in respect of that period.
85In that regard, first, it follows from Article 52(2)(d) of Regulation No 389/2013 that the competent national authority may make any changes to the national allocation table for the third trading period referred to in Article 51(1) of that regulation. Since, according to the second paragraph of Article 88 of Delegated Regulation 2019/1122, Regulation No 389/2013 was still applicable after 31 December 2020 for the operations required in relation to that period, it must be held that that national allocation table can still be amended.
86Second, it must be inferred from Article 53(2) of Regulation No 389/2013 that it is for the Central Administrator, who is to be designated by the Commission pursuant to Article 20 of Directive 2003/87 and who is responsible, under Articles 4 and 6 of Regulation No 389/2013, for operating and maintaining the register and the EUTL, to ensure that any change in the national allocation table leads to the issuance of the number of allowances as thus corrected, by transferring the latter from the ‘EU Allocation Account’ to the holding account of the relevant operator.
87Indeed, Article 52(2) of that regulation, from which it follows, first, that a change to the national allocation table, such as one that would be necessary in the event of a judicial decision in favour of the allocation applicant, must be notified to the Commission and, second, that the Central Administrator must make that change in the EUTL, would be rendered redundant if Article 53(2) of that regulation were to be interpreted as meaning that the Central Administrator does not then have to ensure that the number of allowances as changed in the national allocation table and in the EUTL is actually paid out into the holding account of the operator of the installation concerned.
88Third, it is apparent from Articles 41 and 43 of that regulation that it is for the Central Administrator to create allowances according to the requirements resulting from the applicable legislation and to supply the ‘EU Allocation Account’ with an amount of allowances corresponding to the number of allowances allocated free of charge according to the national allocation table of each Member State.
89Turning to the Central Administrator’s obligation, if a judicial decision is given after 31 December 2020 which leads to a change in the national allocation table in favour of the installation operator, it is for the Central Administrator to examine whether the allowances that ought to have been issued to that operator during the third period, but were not, were placed into the reserve created by Decision 2015/1814, in accordance with Article 10a(7) of Directive 2003/87, or were auctioned in accordance with Article 10 of Directive 2003/87. It is then for the Central Administrator to determine whether it is appropriate for the issuance of the allowances concerned to that operator be made from the allowances in that reserve or by any other means compatible with the budgetary rules of the Union.
90In the light of all the findings above, the answer to the second question is that Decision 2011/278 must be interpreted as meaning that free allowances to which the operator of an installation is entitled in respect of the third trading period (2013 to 2020) may still be issued to the latter after 31 December 2020 by way of enforcement of a judicial decision given after that date.
Costs
91Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
Operative part
On those grounds, the Court (Fifth Chamber) hereby rules:
1.Article 3(d) of Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council must be interpreted as meaning that the concept of a ‘fuel benchmark sub-installation’ covers, within an installation producing primary copper and whose activity falls within Annex I to 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, as amended by Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87 so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community, a flash smelting foundry that causes sulphur present in the raw material used to be oxidised, that raw material being a copper concentrate.
2.Decision 2011/278 must be interpreted as meaning that free allowances to which the operator of an installation is entitled in respect of the third trading period (2013 to 2020) may still be issued to the latter after 31 December 2020 by way of enforcement of a judicial decision given after that date.
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