Polonia : September 28, 2009

Last Wednesday Poland and Estonia won legal challenges to the rules on the European carbon market. As a result, the potential exists for the countries to seek higher caps on industrial carbon emissions.

“The Court of First Instance annuls the [European] Commission’s decisions concerning the National Allocation Plans [NAPs] of Poland and Estonia for greenhouse gas emissions allowances,” the court said in a statement.

The European Commission, which oversees the carbon market, has two months to appeal the decision. A spokesperson from the EC said that it would not comment until the judgment had been fully studied. The appeal process could take over a year. Poland had originally proposed that the European Commission grant permits worth 284.6 million tonnes of carbon emissions each year, but instead received permits for 208.5 million tonnes.

“By imposing, in its review of NAPs, a ceiling on emission allowances to be allocated, the Commission exceeded its powers,” the court’s statement continued.

“It is a surprisingly strong decision in favour of the member states,” Stig Schjølset, a senior analyst at power, gas and carbon market consultancy Point Carbon, told Reuters. He also added that even if the ruling were to be upheld, it didn’t give Poland and Estonia the power to set their own quotas. “The court does not say NAPs should be as the member states proposed. It decided
that the Commission’s assessment should be annulled and re-done with different data. It doesn’t mean member states can do whatever they want,” Mr Schjølset told Reuters.

European carbon futures fell on the news, hitting an 11- week low. There is some worry that the whole cap and trade market could unravel if the ruling is upheld on appeal.
An emissions trader told Reuters, “of course it will go to appeal and it will take a long while, but so far it’s bearish news.” (‘Reuters)