Iberdrola S.A. and Others, Judgement of the Court of 17 of Oct. 2013

Spain amended its system for purchasing wholesale electricity by reducing the remuneration of electricity production to remove unfair windfalls for electricity producers caused by issuance of allowances for free under the EU Emissions Trading System (ETS). Electricity producers challenged the measure asserting that it was contrary to Directive 2003/87/EZ (establishing EU ETS) because it effectively made emissions allowances costly. The European Court of Justice rejected the electricity producers arguments, finding instead that the Directive does not preclude remuneration for electricity producers for the purpose of counterbalancing windfall profits resulting from the allocation of emission allowances. In addition, the court found that the legislative measure does not remove the incentive to reduce greenhouse gas emissions and was thus not inconsistent with the goals of the Directive.