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RWE to fight for 30% increase in free CO2 allocation in court

25 Jun 2012 20:12:28 | edcm


Energy giant RWE will fight for a 30% increase in its allocation of free carbon allowances in a German court in September, its lawyer has told ICIS - a development that could slash one of the biggest shortfalls in the EU's emissions trading system (ETS) if the claim is upheld.

RWE is challenging both rule changes that were brought in for phase II ETS, which deprived it of free allowances for some newly built installations and the general principle of auctioning allowances. RWE believes that to be illegal under the German constitution.

And Germany's other major utility, E.ON, is mounting a similar challenge to its allocations since 2008, lawyer Stefan Altenschmidt of law firm Luther, representing both companies, told ICIS.

The two incumbents were among three energy producers that previously claimed the German emissions trading authority (DEHSt) had unfairly reduced their allocation of allowances in phase II. The claim was thrown out of a Berlin court in 2010 (see EDCM 16 April 2010 and 20 April 2010).

Now the division of RWE that operates the power stations is appealing that ruling in the German federal administrative court.

DEHSt is confident it can win the case.

A spokesman confirmed that the phase II rule change and the general principle of auctioning allowances will be challenged at the hearing, but said: "We succeeded in the previous two instances on that topic, so we do not expect the third instance to overrule the decisions of the lower court."

From 2005 until 2007, German installations were allowed to claim 14 years of free allowances for coal plants built using the cleanest available technology.

On the advice of the Commission, DEHSt repealed that rule for the current phase of the EU emissions trading system (ETS), which runs until the end of this year.

The new round of litigation will see RWE, which has one of the largest shortfalls of carbon allowances in the Europe, take what is likely to be a test case for E.ON and other companies that want the old rules reinstated (see EDCM 15 February 2012).

"It is RWE and others' opinion that that abolishment was illegal under the German constitution and the Commission decision requiring that abolition was not in line with the emissions trading directive," Altenschmidt said.

The company also believes that the general principle of auctioning allowances in Germany in phase II is open to challenge.

"That idea is based on the German constitution, which limits the right of the German taxman to collect money from private companies and citizens. There is a very sophisticated case law on this," Altenschmidt said.

A spokesman for RWE confirmed that it is challenging its reduced allocation in phase II, but said that because litigation is pending, the company could not give any more detailed information about the upcoming hearing.

RWE operates the second largest emitting installation in the EU, the Niederaussem lignite-fired power station, which was short of 13.2m EUAs last year when it emitted a total of 28.7m tonnes of CO2.

E.ON was unavailable for comment as ICIS went to press. VF

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