European Union

Trinseo Deutschland Anlagengesellschaft mbH v. Bundesrepublik Deutschland

Jurisdiction: European Union


Principle law(s): EU Emission Trading Scheme (EU ETS) (Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC)


Side A: Trinseo Deutschland Anlagengesellschaft mbH (Corporation)


Side B: Bundesrepublik Deutschland (Government)


Core objectives:

Company challenged rejection of application of free allocation of emissions allowances


Summary
Trinseo operates an installation for the production of polycarbonate that obtains the steam needed for that production from a plant which is operated, on the same site, by another company, Dow Deutschland Anlagengesellschaft, which is subject to the emission allowance trading scheme established by Directive 2003/87/EC. Trinseo applied for free allocation of emission allowances to its installation for the trading period 2013?2020, which the German government denied because polycarbonates do not fall under the list of products approved for free allocation. Trinseo originally claimed that it was entitled to free allocation of emissions allowances because the steam it uses during the production of polymers requires the emission of greenhouse gases. 

The German government rejected this application and, subsequently, Trinseo sued the German government in the Berlin Administrative Court, which referred the case to the ECJ for preliminary ruling. The ECJ considered "whether Article 2(1) of Directive 2003/87 must be interpreted as meaning that an installation for the production of polymers, in particular the polymer polycarbonate, such as the installation at issue in the main proceedings, which obtains the heat needed for that production from a third-party installation, falls within the activity of ‘[p]roduction of bulk organic chemicals by cracking, reforming, partial or full oxidation or by similar processes', within the meaning of Annex I to that directive, so that it must be considered to fall within the scope of the emissions allowance trading scheme established by that directive." 

The ECJ ruled that, because Directive 2003/87/EC is intended to incentivise emissions reductions in companies, and because polycarbonate production does not directly produce emissions, Trinseo was not entitled to free allocation of emissions trading allowances. Rather, only the company that directly emits greenhouse gases as the result of producing steam, which might later be used to manufacture polymers, is entitled to free emissions allocations.
Case documents

Related laws and policies
  • This law implements European Union legislation
    EU Emission Trading Scheme (EU ETS) (Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC)

    Passed in 2003 Legislative

    This Directive establishes a Community GHG emissions trading scheme from 2005, to enable the Community and the Member States to meet their Kyoto Protocol commitments. Directive 2004/101/EC reinforces the link between the EU's emission allowance trading scheme and the Kyoto Protocol by making the latter's 'project-based' mechanisms (Joint Implementation and the Clean Development Mechanism) compatible with the scheme. From 2005, all installations in the energy sector, iron and steel production and processing, the mineral industry, and the wood pulp, paper and board industry, and emitting the specific GHG associated with that activity, must possess a permit issued by the appropriate authorities. Each Member State must draw up a national plan indicating the allowances it intends to allocate for the relevant period and how it proposes to allocate them to each installation. The Directive also provides for flights that arrive or depart from a Member State's territory to be subject to the EU ETS (from 2012), measure that so far applies to intra-EU flights. Any operator failing to surrender the quantity of allowances commensurate with the emissions from his/her installation during the previous year will have to pay EUR100 (USD 125) per tCO2e and buy allowances for the excess emissions. The 2003 Directive was amended by Directive 2004/101/EC, Directive 2008/101/EC, Regulation (EC) No 219/2009, Directive 2009/29/EC, Decision No 1359/2013/EU, Commission Regulation (EU) No 389/2013, Regulation (EU) No 421/2014 and Regulation (EC) 2017/2392. Directive 2009/29/EC amends Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community. Directive (EU) 2018/410 was adopted in March 2018 to enhance cost-effective emission reductions and low-carbon investments.

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