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.  


Poland v. European Parliament, Council of the EU

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Poland v. European Parliament, Council of the EU - judgment

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International

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Justice is the ethical and political framework that addresses fairness, including issues of responsibility, rights, and structural inequity.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

Tradable permits are market-based tools that grant permission for specific activities, frequently used to regulate emissions. These permits can be issued within a trading system to manage environmental impacts.

A target to reduce the prevalence of a greenhouse gas over a specific time frame

Either money or something of monetary value is transferred between two or more organisations, people or countries.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

The activities of industries that transforms raw materials into finished goods through industrial processes.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

This sector involves the wholesale and retail selling of goods.

This sector involves activities to move goods and people, alongside the storage of products.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

Poland v. European Parliament, Council of the EU - judgment

Target

Policy instrument

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance