Naturvårdsverket v Nouryon Functional Chemicals AB (C-166/23)

Contents

Judgment of the Court (Ninth Chamber)6 June 2024^note(Reference for a preliminary ruling — Environment — Directive 2003/87/EC — Annex I, point 5 — Atmospheric pollution — Scheme for greenhouse gas emission allowance trading — Exclusion of units for the incineration of hazardous or municipal waste — Relevance of the purpose of incineration)In Case C‑166/23,REQUEST for a preliminary ruling under Article 267 TFEU from the Svea hovrätt, Mark- och miljööverdomstolen (Svea Court of Appeal, Land and Environment Court of Appeal, Stockholm, Sweden), made by decision of 15 March 2023, received at the Court on 17 March 2023, in the proceedingsNaturvårdsverketvNouryon Functional Chemicals AB,THE COURT (Ninth Chamber),composed of O. Spineanu-Matei, President of the Chamber, J.-C. Bonichot (Rapporteur) and S. Rodin, Judges,Advocate General: T. Ćapeta,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– the Polish Government, by B. Majczyna, acting as Agent,– the European Commission, by P. Carlin and B. De Meester and G. Wils, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of point 5 of 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 (OJ 2003 L 275, p. 32), as amended by Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 (OJ 2018 L 76, p. 3) (‘Directive 2003/87’).

2The request has been made in proceedings between the Naturvårdsverket (Environmental Protection Agency, Sweden; ‘the Agency’) and Nouryon Functional Chemicals AB (‘Nouryon’), a Swedish company, concerning the decision of that agency ordering Nouryon to complete its monitoring plan as regards greenhouse gas emissions.

Legal context

European Union law

Directive 2003/87

3Recital 25 of Directive 2003/87 is worded as follows:‘Policies and measures should be implemented at Member State and Community level across all sectors of the European Union economy, and not only within the industry and energy sectors, in order to generate substantial emissions reductions. …’

4Article 1 of that directive, entitled ‘Subject matter’, provides:‘This Directive establishes a system for greenhouse gas emission allowance trading within the Union (hereinafter referred to as the “EU ETS”) in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’

5Article 2 of that directive, entitled ‘Scope’, provides:1. This Directive shall apply to emissions from the activities listed in Annex I and greenhouse gases listed in Annex II.2. This Directive shall apply without prejudice to any requirements pursuant to [Council] Directive 96/61/EC [of 24 September 1996 concerning integrated pollution prevention and control (OJ 1996 L 257, p. 26)].…’

6Article 3(e) of Directive 2003/87, defines an ‘installation’ as ‘a stationary technical unit where one or more activities listed in Annex I are carried out and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions and pollution’.

7Article 4 of that directive provides:‘Member States shall ensure that, from 1 January 2005, no installation carries out any activity listed in Annex I resulting in emissions specified in relation to that activity unless its operator holds a permit issued by a competent authority in accordance with Articles 5 and 6, or the installation is excluded from the EU ETS pursuant to Article 27. This shall also apply to installations opted in under Article 24.’

8Article 6 of that directive provides:1. The competent authority shall issue a greenhouse gas emissions permit granting authorisation to emit greenhouse gases from all or part of an installation if it is satisfied that the operator is capable of monitoring and reporting emissions.A greenhouse gas emissions permit may cover one or more installations on the same site operated by the same operator.2.Greenhouse gas emissions permits shall contain the following:(a) the name and address of the operator;(b) a description of the activities and emissions from the installation;(c) a monitoring plan that fulfils the requirements under the acts referred to in Article 14. Member States may allow operators to update monitoring plans without changing the permit. Operators shall submit any updated monitoring plans to the competent authority for approval;(d) reporting requirements; and(e) an obligation to surrender allowances, other than allowances issued under Chapter II, equal to the total emissions of the installation in each calendar year, as verified in accordance with Article 15, within four months following the end of that year.’

9Article 14 of that directive provides:1. The [European] Commission shall adopt implementing acts concerning detailed arrangements for the monitoring and reporting of emissions …, which shall be based on the principles for monitoring and reporting set out in Annex IV and the requirements set out in paragraph 2 of this Article. ……3. Member States shall ensure that each operator of an installation … monitors and reports the emissions from that installation during each calendar year … to the competent authority after the end of that year in accordance with the acts referred to in paragraph 1.…’

10Point 5 of Annex I to Directive 2003/87 states:‘When the capacity threshold of any activity in this Annex is found to be exceeded in an installation, all units in which fuels are combusted, other than units for the incineration of hazardous or municipal waste, shall be included in the greenhouse gas emission permit.’

11Annex I to Directive 2003/87 contains a table listing the categories of activities to which that directive applies. Included within that table, respectively, are the first and twenty-third activities:‘Combustion of fuels in installations with a total rated thermal input exceeding 20 MW (except in installations for the incineration of hazardous or municipal waste)…Production of bulk organic chemicals by cracking, reforming, partial or full oxidation or by similar processes, with a production capacity exceeding 100 tonnes per day’.

Implementing Regulation (EU) 2018/2066

12The first paragraph of Article 5 of Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87 and amending Commission Regulation (EU) No 601/2012 (OJ 2018 L 334, p. 1) provides:‘Monitoring and reporting shall be complete and cover all process and combustion emissions from all emission sources and source streams belonging to activities listed in Annex I to Directive 2003/87/EC and other relevant activities included pursuant to Article 24 of that Directive, and of all greenhouse gases specified in relation to those activities, while avoiding double-counting.’

13According to the first subparagraph of Article 11(1) of that regulation:‘Each operator or aircraft operator shall monitor greenhouse gas emissions on the basis of a monitoring plan approved by the competent authority in accordance with Article 12, taking into account the nature and functioning of the installation or aviation activity to which it applies.’

14Article 14(2)(e) of that regulation is worded as follows:‘The operator or aircraft operator shall modify the monitoring plan, at least, in any of the following situations:…(e) the monitoring plan is not in conformity with the requirements of this Regulation and the competent authority requests the operator … to modify it’.

Directive 96/61

15Recital 8 of Directive 96/61 states:‘Whereas the objective of an integrated approach to pollution control is to prevent emissions into air, water or soil wherever this is practicable, taking into account waste management, and, where it is not, to minimize them in order to achieve a high level of protection for the environment as a whole’.

16Article 3 of that directive reads as follows:‘Member States shall take the necessary measures to provide that the competent authorities ensure that installations are operated in such a way that:…(c) waste production is avoided in accordance with Council Directive 75/442/EEC of 15 July 1975 on waste [(OJ 1975 L 194, p. 39)]; where waste is produced, it is recovered or, where that is technically and economically impossible, it is disposed of while avoiding or reducing any impact on the environment;…’

Swedish law

17Paragraph 1, of Chapter 3, of the förordningen (2020:1180) om vissa utsläpp av växthusgaser (Ordinance (2020:1180) on certain greenhouse gas emissions) (‘the Swedish Ordinance’) provides.‘The emission, without a permit, of greenhouse gases from installations where an activity referred to in the annex is carried out is prohibited’

18Paragraph 5 of Chapter 3 of the Swedish Ordinance provides:‘An operator wishing to apply for a greenhouse gas emissions permit must make the application to [the Agency].The application shall include: …3. a monitoring plan.’

19Instruction 4 in the annex to the Swedish Ordinance provides:‘When the capacity threshold of one of the activities described in points 1 to 28 of the section ‘description of activities’ is exceeded in an installation, all units in which fuels are combusted, other than units for the incineration of hazardous or municipal waste, shall be included in the greenhouse gas emission permit.’

20In Paragraph 6 of the lagen (2020:1173) om vissa utsläpp av växthusgaser (Law (2020:1173) on certain greenhouse gas emissions) (‘the Swedish Law’), a monitoring plan is defined as being ‘a written description as referred to in Paragraph 12 of the Monitoring and Reporting Regulation’. In accordance with the same provision, the ‘Monitoring and Reporting Regulation’ means Implementing Regulation 2018/2066.

The dispute in the main proceedings and the questions referred for a preliminary ruling

21Nouryon, located in Stenungsund (Sweden) produces bulk organic chemicals. The production volume exceeds 100 tonnes per day.

22That activity is carried out on the basis of a permit granted in 2004 pursuant to the miljöbalken (Environmental Code). The production process creates hazardous waste contained in residual water resulting from the industrial process.

23Pursuant to a provisional order in the permit, the company is to process such water in an incinerator or have the water treated in another authorised installation for hazardous waste. Nouryon has chosen to process the residual water in an incinerator at the installation in Stenungsund. The installation is constructed in such a way that the polluted water is piped directly from that part of the installation where the chemical production takes place to the incinerator.

24The incinerator is used almost exclusively to incinerate the waste water produced during the process, namely, in total, approximately 40000 tonnes per year. As the water’s energy content is negligible, the incineration is carried out with the addition of combustible gas. The energy released by the incineration is recovered in the form of steam to be used in the production process. However, the greater part of the energy for the production is obtained from an industrial boiler. In 2017, the incinerator was supplied with 4289 tonnes of combustible gas, which corresponds to 245 terajoules, whereas 182 terajoules were recovered. In that year, the combustion of combustible gas in the industrial boiler corresponded to approximately 726 terajoules (approximately 14069 tonnes). The incinerator emits into the atmosphere a quantity of approximately 11500 tonnes of carbon dioxide per year, according to Nouryon, and 17000 tonnes according to the Agency.

25The installation is, moreover, specifically authorised to emit greenhouse gases within the framework of the EU ETS.

26The Agency found that the hazardous waste incinerator was not referred to in the monitoring plan for the Stenungsund installation and that the emissions of greenhouse gases from that incinerator were therefore not included in the total emissions from that installation.

27Consequently, the Agency ordered Nouryon to provide an additional monitoring plan which included the incinerator. It stated that the installation must be authorised for all of the units which are an integral part of it.

28Nouryon brought an action against the Agency’s injunction, before the Nacka tingsrätt – Mark- och miljödomstolen (District Court, Land and Environment Court, Nacka, Sweden), in which it submitted that, pursuant to point 5 of Annex I to Directive 2003/87, a unit for the incineration of hazardous waste must not be included in the EU ETS, whether or not it is an integral part of an installation covered by that scheme. That court upheld that argument and quashed the Agency’s injunction.

29The Agency appealed against that court’s judgment before the Svea hovrätt, Mark- och miljööverdomstolen (Svea Court of Appeal, Land and Environmental Court of Appeal, Stockholm, Sweden). That latter court has doubts as to whether the incinerator at issue falls within the exception provided for in point 5 of Annex I to Directive 2003/87.

30In those circumstances, the Svea hovrätt, Mark- och miljööverdomstolen (Svea Court of Appeal, Land and Environment Court of Appeal, Stockholm) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) Is the exemption for units for the incineration of hazardous waste in [point] 5 of Annex I to [Directive 2003/87] – that all units in which fuels are combusted are to be included in the greenhouse gas emissions permit, other than units for the incineration of hazardous waste – applicable to all units which incinerate hazardous waste, or must there be some qualifying factor in order for the exemption to be applied? If such a factor is necessary, is the purpose of the unit thus to be decisive for application of the exemption, or can other factors also be relevant?(2) If the unit’s purpose is decisive to the assessment, is the exemption still to be applied to a unit which incinerates hazardous waste but which has a main purpose other than that incineration?(3) If the exemption applies only to a unit which has as its main purpose the incineration of hazardous waste, which criteria are to be used in the assessment of the purpose?(4) If, in an assessment, it is decisive whether the unit is to be regarded as an integral part of an activity in an installation for which a permit is required under the directive – for example, as set out in section 3.3.3 of the Commission Guidance – which requirements are thus to be set in order for the unit to be regarded as an integral part thereof? Can it be required, for example, that the production must be impossible or not allowed without the unit (see [the European] Commission Guidance, page 14, footnote 14), or can it be sufficient for the unit to be technically linked to the installation and accept hazardous waste only from that installation?’

Consideration of the questions referred

31By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether point 5 of Annex I to Directive 2003/87 must be interpreted as meaning that all units for the incineration of hazardous or municipal waste are excluded from the scope of application of that directive, including those which are integrated within an installation falling within that scope and which do not have the incineration of that waste as their sole purpose.

32As a preliminary point, it must be recalled that Directive 2003/87 has the purpose of establishing an emission allowance trading system which seeks to reduce greenhouse gas emissions into the atmosphere to a level that prevents dangerous anthropogenic interference with the climate system and the ultimate objective of which is protection of the environment (judgment of 16 December 2021, Apollo Tyres (Hungary), C‑575/20, EU:C:2021:1024, paragraph 24 and the case-law cited).

33Article 2(1) of Directive 2003/87 provides that the scope of that directive applies to emissions from the activities listed in Annex I and greenhouse gases listed in Annex II, including, in particular, carbon dioxide (judgment of 16 December 2021, Apollo Tyres (Hungary), C‑575/20, EU:C:2021:1024, paragraph 25 and the case-law cited).

34Article 4 of Directive 2003/87 provides that ‘Member States shall ensure that, from 1 January 2005, no installation carries out any activity listed in Annex I resulting in emissions specified in relation to that activity unless its operator holds a permit issued by a competent authority in accordance with Articles 5 and 6, or the installation is excluded from the EU ETS pursuant to Article 27. …’.

35Article 3(e) of that directive defines an ‘installation’ as ‘a stationary technical unit where one or more activities listed in Annex I are carried out and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions and pollution’.

36The activities referred to in Annex I include the ‘production of bulk organic chemicals by cracking, reforming, partial or full oxidation or by similar processes, with a production capacity exceeding 100 tonnes per day’.

37Nouryon’s installation, which produces bulk organic chemicals, is subject to a permit being obtained for that purpose.

38That installation includes an incinerator intended to incinerate waste water produced during the industrial process. The equipment consequently emits carbon dioxide. The energy released by the incineration is recovered in the form of steam to be used in the production process.

39As it is technically linked with the activities conducted on the Stenungsund site and it is capable of having an impact on emissions, that incinerator therefore constitutes a part of the installation, within the meaning of Article 3(e) of Directive 2003/87.

40The dispute in the main proceedings concerns whether that incinerator must be authorised in the same way as the rest of the installation under Directive 2003/87, or whether that is not necessary by virtue of the exception referred to in point 5 of Annex I to that directive. The referring court therefore considers that the outcome of the dispute depends on the interpretation to be given to that provision.

41Point 5 of Annex I to Directive 2003/87 provides that ‘when the capacity threshold of any activity in this Annex is found to be exceeded in an installation, all units in which fuels are combusted, other than units for the incineration of hazardous or municipal waste, shall be included in the greenhouse gas emission permit.’

42According to the Commission’s interpretation in its ‘Guidance on Interpretation of Annex I of the EU ETS Directive’, adopted on 18 March 2010, the fact that a unit incinerates hazardous or municipal waste does not suffice for it to be excluded from the scope of application of Directive 2003/87. The Commission considers it necessary, in addition, first, that the unit for the incineration of hazardous or municipal waste is not part of an installation whose activity is referred to in Annex I to that directive and, secondly, that the incineration of such waste is its main purpose.

43That is why, according to the Commission, a unit for the incineration of hazardous waste, the heat from which is recovered and is used in the functioning of an installation falling within the scope of application of point 5 of Annex I to Directive 2003/87, is not excluded from that scope.

44However, that interpretation is not supported by the literal, systematic and teleological methods of interpretation upon which the Court normally relies.

45As regards, in the first place, a literal interpretation of point 5 of Annex I to Directive 2003/87, it must be observed that that provision expressly contemplates the situation in which an installation requiring a permit for the emission of greenhouse gases comprises several units in which fuels are combusted and provides that, in such a case, those units must be included in that permit, other than units for the incineration of hazardous or municipal waste.

46Consequently, the wording of point 5 appears to exclude a unit for the incineration of hazardous waste from being included in the monitoring plan for the installation on the ground that it is an integral part of that installation.

47In addition, since exceptions must be interpreted strictly, the exception referred to in point 5 must be limited to units genuinely dedicated to the incineration of hazardous or municipal waste and which, consequently, incinerate other waste only marginally.

48By contrast, the wording of point 5 of Annex I to Directive 2003/87 does not indicate that the exclusion of units for the incineration of hazardous or municipal waste from a greenhouse gas emissions permit depends on the purpose for which that waste is incinerated.

49As regards, in the second place, systematic and teleological interpretations of point 5 of Annex I to Directive 2003/87, it is appropriate to examine them together.

50As is clear, inter alia, from both recital 25 and Article 1 of Directive 2003/87, the general objective of that directive is to achieve, by establishing a system for the allocation of greenhouse gas emission allowances, a reduction of emissions of those gases.

51Nevertheless, the exemption provided for in point 5 Annex I to Directive 2003/87 for units of incineration of hazardous and municipal waste does not pursue that objective as its priority. Rather, it responds to a secondary objective of that directive, as the EU legislature considered that the establishment of a system for the allocation of emission allowances must not impede the disposal of hazardous and municipal waste by incineration.

52In that regard, it must be observed that Directive 2003/87, as stated in its title, amends Directive 96/61. Article 2(2) of Directive 2003/87 states that ‘this Directive shall apply without prejudice to any requirements pursuant to Directive [96/61].’ Directive 96/61, the objective of which is wider than that of Directive 2003/87 and concerns integrated pollution prevention and control, expressly provides, in Article 3(c), for the recovery and disposal of waste.

53Recital 8 of Decision 96/61 also states that ‘whereas the objective of an integrated approach to pollution control is to prevent emissions into air, water or soil wherever this is practicable, taking into account waste management, and, where it is not, to minimize them in order to achieve a high level of protection for the environment as a whole’.

54It follows from the preceding elements that the EU legislature intended to promote the incineration of hazardous and municipal waste by removing them from the obligation to be authorised under the EU ETS. To limit the scope of that exception using the concept of a ‘main purpose’ is inconsistent with that objective.

55Furthermore, the scope of the exception must also be interpreted in the light of the principal objective of Directive 2003/87. The interpretation advanced by the Commission, according to which a unit for the incineration of hazardous or municipal waste which contributes, by supplying it with heat, to the functioning of an installation within the EU ETS, should itself fall within the scope of application of the EU ETS, is contrary to that objective.

56Such an interpretation would lead to the benefit of that derogation being reserved to units for the incineration of hazardous and municipal waste the heat produced by which is not recovered by an installation covered by Directive 2003/87, which would result in a waste of energy and an increase in emissions.

57Having regard to the foregoing considerations, the answer to the questions referred is that point 5 of Annex I to Directive 2003/87 must be interpreted as meaning that all units for the incineration of hazardous or municipal waste are excluded from the scope of application of that directive, including those which are integrated within an installation falling within that scope and which do not have the incineration of that waste as their sole purpose, provided that they are used for the incineration of other waste only marginally.

Costs

58Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring 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 (Ninth Chamber) hereby rules: Point 5 of Annex I to Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, as amended by Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018,must be interpreted as meaning that all units for the incineration of hazardous or municipal waste are excluded from the scope of application of that directive, as amended, including those which are integrated within an installation falling within that scope and which do not have the incineration of that waste as their sole purpose, provided that they are used for the incineration of other waste only marginally.