Poland v. European Parliament, Council of the EU

The European Union’s (EU) Directive 2003/87 established a scheme for greenhouse gas emission allowance trading at the EU level (ETS). As the ETS developed, it had a growing structural imbalance in the supply and demand of allowances, resulting in an excess that could reach around 2 billion allowances. In October 2014, the European Council adopted an instrument to stabilize the market as part of the ETS called a "market stability reserve.” These reserves would not be released unless the total number of allowances in circulation was less than 400 million. The market stability reserve would result in an increase in the price of emission allowances. When adopting this measure, the Council did not adopt it under a special legislative procedure pursuant to Article 192(2)(c) of the Treaty on the Functioning of the EU (TFEU). That procedure is required if the Council adopts "measures significantly affecting a Member State's choice between different energy sources and the general structure of its energy supply." In 2016 Poland filed an application with the European Court of Justice arguing that the decision should be annulled as it should have been adopted under a special legislative procedure. Poland is particularly reliant on fossil fuels and this decision significantly affects Poland's choice between different energy sources and the general structure of its energy supply. An increase in emission allowance prices could lead to a change in the competitiveness of various types of power stations and in the structure of electricity production at a national level, and to a decrease in the competitiveness of the energy sector and the Polish economy. The Court rejected this argument, holding that the aim and content of the contested decision was not to have the primary outcome of significantly affecting Poland's choice between different energy sources and the general structure of its energy supply. Poland also argued that the European Council had set the date of the application of the market stability reserve at 2021, and that the defendants, by bringing forward the date to 2019, breached article 15 of TEU and infringed the obligation of sincere cooperation. The Court ruled that there was no reference in the Council's decision to starting the market stability reserve at 2021 and rejected the argument. Poland also argued the infringement of legal certainty, protection of legitimate expectations and principle of proportionality, all of which the Court also rejected.