Case T‑126/19

Krajowa Izba Gospodarcza Chłodnictwa i Klimatyzacji

v

European Commission

Judgment of the General Court (First Chamber), 16 June 2021

(Environment – Regulation (EU) No 517/2014 – Fluorinated greenhouse gases – Allocation of quotas for placing hydrofluorocarbons on the market – Plea of illegality – Article 16 of Regulation No 517/2014 and Annexes V and VI thereto – Principle of non-discrimination – Obligation to state reasons)

1. Plea of illegality – Scope – Measures the illegality of which may be pleaded – General measure providing the basis of the contested decision – Need for a legal connection between the contested measure and the contested general measure

   (Arts 263 and 277 TFEU)

   (see paragraphs 33, 34)

2. EU law – Principles – Equal treatment – Different treatment objectively justified – Criteria for assessment – Application to a legislative act of the Union

   (European Parliament and Council Regulation No 517/2014, Art. 16, Annexes V and VI)

   (see paragraphs 47, 49, 50, 81, 86, 87)

3. Environment – Atmospheric pollution – Reduction of fluorinated greenhouse gas emissions – Regulation No 517/2014 – Allocation of quotas for placing hydrofluorocarbons on the market – Difference in treatment between historical undertakings and new entrants – No breach of the principle of equal treatment

   (European Parliament and Council Regulation No 517/2014, Art. 16, Annexes V and VI)

   (see paragraphs 63-73, 81-83, 101-107, 111-113, 124, 144, 145)

4. Environment – Development of EU policy – Discretion of the EU legislature – Scope – Limits – Observance of the principle of proportionality

   (see paragraphs 88-92, 134)

5. Acts of the institutions – Statement of reasons – Obligation – Scope – Measures of general application – Judicial review – Scope

   (Art. 296 TFEU)

   (see paragraphs 148-153)

Résumé

Krajowa Izba Gospodarcza Chłodnictwa i Klimatyzacji (‘the applicant’) is a Polish undertaking whose activity gives rise to emissions of fluorinated greenhouse gases, in particular hydrofluorocarbons (HFCs). HFCs are a category of fluorinated greenhouse gases whose climatic warming potential is much higher than that of carbon dioxide (CO2), and which are used, inter alia, in refrigeration and air-conditioning systems, aerosols and the manufacture of insulating foam. Regulation No 517/2014 on fluorinated greenhouse gases ( 1 ) seeks to limit those HFC emissions in the long term by gradually reducing the quantities of HFCs placed on the market by producers or importers. To that end, the Commission determines each year a maximum quantity of HFCs that may be placed on the market in the European Union. It also set up an electronic registry for quotas for placing HFCs on the market, where producers and importers which are active on that market must register.

In 2014, the applicant registered in that registry as a ‘new market player’, that is to say as an undertaking which had not declared that it had placed HFCs on the market between 2009 and 2012. The allocation of quotas for that category of undertakings is based exclusively on the annual declarations submitted to the Commission. For 2019, the applicant declared a need of 207433 tonnes of CO2 equivalent HFC. By decision of the Commission of 11 December 2018 (‘the contested decision’), the applicant was allocated a quota of 4096 tonnes of CO2 equivalent HFC.

The applicant challenged that decision before the General Court, raising a plea of illegality in respect of Article 16 of Regulation No 517/2014, read in conjunction with Annexes V and VI thereto, which introduces the quota allocation system in question and which forms the basis of the contested decision. In that regard, it maintained, in particular, that the rules on the apportionment of quotas are contrary to the principle of non-discrimination. In its judgment, the Court dismisses the applicant’s action and upholds the validity of Article 16 of Regulation No 517/2014.

Findings of the Court

The Court observes, first of all, that the principle of non-discrimination requires equal treatment of comparable situations. According to the case-law, for the EU legislature to be accused of breaching the principle of non-discrimination, it must have treated comparable situations differently, thereby subjecting some persons to disadvantages as opposed to others. Next, that difference in treatment must not be capable of being justified on the basis of an objective and reasonable criterion and must not be proportionate to the aim pursued by that difference in treatment. In addition, where it is called upon to make choices, in particular, of a political nature, and undertake complex assessments, the legislature has a broad discretion.

Thus, the Court states, first, that there is a difference in treatment when allocating quotas for placing HFCs on the market between the historical undertakings, namely those which have declared that they had placed HFCs on the market between 2009 and 2012, and new entrants, which have not declared that they had placed HFCs on the market during that period. The historical undertakings were allocated, during the first three-year period when Regulation No 517/2014 was applicable, quotas representing 89% of the maximum quantity of HFCs that could be placed on the EU market each year, while the entirety of new entrants were allocated only 11%.

Second, historical undertakings and new entrants are in a comparable situation in the light of the purpose and objective of Regulation No 517/2014. Those two categories of undertaking produce greenhouse gas emissions which have an equally negative effect on the climate and require quotas for placing HFCs on the market.

Third, the difference in treatment gives rise to disadvantages for new entrants, such as the applicant, resulting, in particular, from the allocation to historical undertakings of quotas representing the majority of the available quantities of HFCs that can be placed on the EU market each year.

As to the justification for that difference in treatment, the Court notes, fourth, that it is based on a consideration of the relevant data resulting from an impact assessment and from a wide public consultation preceding the adoption of the regulation. It is apparent from that data that the free quota allocation system was favoured by the legislature as compared with the option of selling quotas by auction. The latter option would be disproportionate in relation to the size of the HFC market and its proper functioning would not be ensured given the highly concentrated nature of that market. In addition, the legislature opted for a quota allocation system based on historical emissions and not on requests from undertakings, in order to combat the practice of ‘over-reporting’ emissions. It follows that the difference in treatment is based on objective and appropriate criteria in order to ensure the proper functioning of the quota allocation system and guarantee sufficient access to the market for new entrants.

Finally, the Court concludes that the difference in treatment is proportionate to the aim pursued and that the legislature did not exceed its margin of discretion in the matter, since it took account of the interests of new entrants by providing them with a fixed reserve, for the first three-year period in which quotas were allocated, set at 11% of the available quantities of HFCs. In that regard, the Court notes that the proportion of quotas allocated from the reserve and, therefore, available to new entrants, will continue to increase over the years, while the proportion of the quantities to be allocated to historical undertakings will continually decrease.

( 1 ) Regulation (EU) No 517/2014 of the European Parliament and of the Council of 16 April 2014 on fluorinated greenhouse gases and repealing Regulation (EC) No 842/2006 (OJ 2014 L 150, p. 195).