The System of the Directive

The procedure for allocating and issuing allowances consists of three steps. First, the Member State must propose a 'national allocation plan'. Article 9.1. of the 2003/87/EC states that

37 ECJ, 15 July 1963, Case 25/62 - § 223 - Rec. p. 199; Cf. also ECJ, 24 February 1987, Case 26/86 - Deutz und Geldermann v. Council - §9 - Rec., p. 941; ECJ, 15 February 1996, Case C-209/94 P - Buralux e.a. v. Council - §25 - Rec. p. I-615; ECJ, 2 April 1998, Case C-321/95 P - Stichting Greenpeace Council - Rec. p. I-1651. For an analysis, see Van Raepenbusch (2005), pp. 623-31; Waelbroeck and Waelbroeck (1993).

38 Some judgments have made more flexible that restrictive case-law: see ECJ, 16 May 1991, Case C-358/89 - Extramet v. Council (Rec. p. I-2501); ECJ, 18 May 1994, Case C-69/89 - Codorniu v. Council - Rec. p. I-1853.

39 Rasmussen (1980); Waelbroeck and Verheyden (1995); Arnulli (1995); Vandersanden (1995).

40 About that question, see Van Raepenbusch (2005, p. 627).

41 ECJ, 23 April 1986 - Case C-194/83 (Rec. p. 1365), §23.

for each period referred to in Article 11(1) and (2), each Member State shall develop a national plan stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them. The plan shall be based on objective and transparent criteria, including those listed in Annex III, taking due account of comments from the public.

The second stage is that the Commission, which is competent to evaluate the national allocation plan, decides to accept or to refuse it if it seems that the national plan is or is not in accordance with the criteria of Annex III of the Directive. And finally, each year, 'the member States' competent authorities issue a share of the allocated EU allowances to the operators of the covered installations'. As we underlined in section 3, companies can fight the national decision but still then, cannot fight the Commission's decision.

The Member States are not free to notify their national allocations plans at a time of their choosing. The plan has to be published and notified to the Commission and to the other Member States at least 18 months before the beginning of the relevant period. Reasons shall be given for any rejection decision by the Commission.

The 1st phase period was created as a 'test' or 'preparatory' period for the Member States.42 The majority of the '1st' national allocation plans did not receive any objections from the Commission. The plans had to be published and notified to the Commission by 31 March 2004.

For the 2nd period, known as the 'Kyoto Period', the notification's deadline was fixed as 30 June 2006. The experience of the 1st period acted upon the content of that second round of communications. In these guidelines, the Commission summarized the difficulties, the main ones of which were that in the 2nd period Member States (and the European Community) are submitted to Kyoto's quantum of emissions.43 This difference explains why the Commission is now stricter in its evaluation of the national allocations plans than during the 1st phase. All the national allocation plans have been rejected by the Commission, without any exceptions, that last requiring each Member State to make some adjustments or some specific modifications of their NAPs' provisions.

42 As the Commission said, 'the best preparation for the Community and its member States might be to develop their own emission trading experience'. See the Communication of the Commission (COM(99)230 final).

43 Commission proposal for Directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the EU greenhouse gas emission allowance trading scheme, COM(2008)16 final, 23.01.2008, p. 2. 'However, the environmental outcome of the 1st phase of the EU ETS could have been more significant but was limited due to excessive allocation of allowances in some Member States and some sectors, which must mainly be attributed to reliance on projections and a lack of verified emission data'.

The Directive is particularly vague about how the comments of the public have to be taken into account by the Member States. In our opinion, the Court of First Instance really pushed this question further than the Directive itself. The first time the Court pursued that question was United Kingdom v. Commission. The judges discovered a double public consultation system: the first and clearly prescribed public consultation must be made during the elaboration of the national plan, before the notification to the Commission. But, in the Court's view, after the Commission's decision authorizing the allocation and before the national decision of allocation, there is also a second round of public consultation. In its opinion, if the modifications to the national plan were limited to those suggested by the Commission, the second round of public consultation 'would be deprived of its effectiveness and [...] would be rendered purely academic'.44 In other words, the European judges recognized a kind of 'double procedure' in the matter of the public consultation to grant the Member State a margin of modification of its national allowance plan out of the scope of [and after] the Commission's remarks. A clear double procedure that does not appear clearly in the ETS Directive.

In Germany v. Commission, the Court referred to this appreciation of the second public consultation of the United Kingdom v. Commission case in order to clarify it:

Article 9(1) and Article 11(1) of the directive oblige the Member State to '[take] due account of comments from the public', both in the NAP, that is to say following an initial public consultation, and in the allocation decision, adopted following a second public consultation. It follows, first, that, in the absence of an express prohibition in Article 11(1) of subsequent amendment of the individual allocation of allowances, the NAP and the allocation decision may expressly provide for such a possibility of amendment, provided that the criteria for exercise of that power are laid down in an objective and transparent manner.

It must be emphasized that the Court used its own 'two-step public consultation' interpretation to refuse the Commission's point of view. Although the Directive 2003/87/CE specifies that the elaboration of the national plan must take 'due account of the public comments', there is no clear and explicit textual basis about that second round of public consultation. These cases are an example of the influence of the judges, especially when the Directive and the Commission (in its guidelines) are particularly imprecise.

44 Court of First Instance, 23 November 2005, Case T-178/05 - United Kingdom/Commission - § 57.

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