EU LAWSUITS ON EMISSION ALLOWANCES

Balancing the needs of developing economies against the imperatives of climate change is complicated. The rule of law doesn't make things more simple, it makes things more fair. The net result of all the legal turmoil described here will be a more comprehensive and firmer set of emissions regulations. Whether they are more effective or not will then be seen. That's how it works: Feedback, improvement, the system gets better...

EU wrangling on carbon emissions moves into courts
James Kanter and Stephen Castle, July 31, 2007 (International Herald Tribune)

WHO
Member nations of the European Union (EU), the European Commission (EC), the European Court of Justice

What they are haggling over. (click to enlarge)

WHAT
EU members are bringing lawsuits against their EC-assigned emission caps for the next phase of emissions trading, claiming that the stringent limits restrain their economic growth. Others are getting pushback from domestic industries.

WHEN
- Latvia joined the growing list July 31.
- Phase Two of the EU Kyoto Emissions trading Scheme (ETS) begins in 2008.
WHERE
- The European Court of Justice is based in Luxembourg City
- Poland, Hungary, the Czech Republic, Slovakia and Estonia are bringing suits. Germany and Britain are getting pushback.

WHY
- Industries like steel and electricity bear severe burdens and may succumb to dimished production when emissions limitations are imposed. They may not be able to compete against rivals in nations like China, India, the US and Australia which do not impose emissions limitations. When power and building materials in a country are not competitive, the country’s entire economy may become noncompetitive.
- The new, eastern European member countries are especially burdened because they come into the Union economically behind western EU rivals.
Example: The EU is forcing a phase-out of a Latvian nuclear plant and has no relacement except coal, which will certainly produce more emissions than the Communist-era nuclear plant. Latvia asked for 6.25 million tons of yearly emissions, 2008 to 2012, but was allocated 3.43 million tons.
- While eastern EU nations accept the need to negotiate the caps, they resent the impostions on their growth and describe the EC actions as elitist and limitations on freedom, like Communism.
- The EC’s concerns are on keeping the market for emissions in check by restraining availability. If they allow the emerging economies too much emission, it will lower the price of credits and make emitting too cheap, leading to loss of control over emissions. This is exactly what hampered Phase One of Euorpe’s Kyoto process and the EC is trying to prevent the trading system from failing Phase Two.
- Germany, Britain and 3 companies - Drax Power of Britain, EnBW of Germany and US Steel Kosice of Slovakia challenged the EC in Phase One and some cases succeeded. Hungary, Poland, Slovakia, Czech Republic, and 13 companies – half Polish cement companies - have brought cases for Phase Two.

The volatility and imperfections of Phase One should lead to a better, more effective Phase Two. (click to enlarge)

QUOTES
- Cándido García Molyneux, special counsel, EU Court: "The reality behind all of this is the pain that governments face in having to go back to their factories and tell them to emit less…It's particularly tough when the factory turns around and says a similar facility in the country next door does not have to do the same thing."
Barbara Helfferich, spokeswoman, European Commission: "We are confident that our decisions that have been challenged will stand up in court…[We] applied the rules fairly [and have not] discriminated in any way."
- Czech president Vaclav Klaus: "Communism was replaced by the threat of ambitious environmentalism…the biggest threat to freedom, democracy, the market economy and prosperity at the beginning of the 21st century."
- Georgina Crowhurst, London environmental law solicitor, Clyde & Co.: "There are a quite a few new cases in the pipeline as these companies are keen to challenge the commission on the CO2 quotas…They see the restrictive quotas as a serious threat to profitability."