On November 30, 2022, the District Court of The Hague decided that energy companies RWE and Uniper could not claim financial compensation for mandatory phase-out of coal-fired electricity production. In 2019, the Dutch government had adopted the Prohibition of Coal in Electricity Production Act to help implement its obligations under international climate law. The law provides that coal-fired power stations may no longer use coal as a fuel to generate electricity in the long term (by 2030 at the latest). The law aims to reduce CO₂ emissions from power plants. 

The case was brought by German energy companies owning three major coal-fired power plants in the Netherlands, stating that the law infringes on their property rights because it was  introduced without offering a financial compensation scheme. The energy companies had filed claims of EUR 1.4 billion and EUR 1 billion respectively against the Dutch state, claiming the ban on coal-fired power generation by 2030 was a form of expropriation in violation of their right to property in Article 1 of Protocol 1 of the European Convention on Human Rights, and the right to property in Article 17 of the EU Charter of Fundamental Rights. According to European human rights law, these provisions protect the right to property of both natural and legal persons.

The District Court ruled that whilst the law indeed infringes the right to property of the energy companies, this infringement is not unlawful. In light of the established case-law of the European Court of Human Rights, the District Court determines whether the Prohibition of Coal in Electricity Act follows the criteria for a lawful interference with the right to property. These criteria include the so-called ‘fair balance’ test, encompassing consideration of the nature and scale of the interference –  including whether the measure entails a ‘de facto expropriation’ which would normally be eligible for compensation – and its proportionality, necessity. and foreseeability.  In terms of expropriation, the Court applied a strict test following from ECHR case-law and a previous Dutch Supreme Court ruling. Notably: de facto expropriation does not exist in situations where, even ‘if a measure leads to the termination of the company, the entitled party retains any economic interest or a meaningful possibility to use (assets of) the company’. The Court decided that there are evidently several financial interests in continued use of the power plants, including as they may be reconverted to using other fuels, such as biomass. The measure did not amount to expropriation, instead, it fell with the sphere of lawful regulation of companies, which does not necessitate compensation per se.

The District Court further decided that the measures taken by Dutch State to reduce CO₂ emissions are proportional and that the interests of the owners have been sufficiently taken into account when adopting the law. According to the Court, the ban on use of coal was also foreseeable for the owners, especially if GHG emissions from power stations had not been reduced very significantly before 2020, for example by switching to biomass or by capturing CO₂. Such measures were not undertaken by the companies at their MPP3 power station and the Eemshaven power station. On the other hand, the Amer power plant already runs almost entirely on biomass. The owner of the latter station could have foreseen that this power station would not be allowed to be revert back to coal once a subsidy for use of (woody) biomass terminates at the end of 2027.

The Court also attached importance to the fact that there had been significant  international and national societal debate on these issues, signaling that curbs on coal fired electricity were to be expected in the near future. Specifically, companies could not have expected new coal-fired electricity plants that were planned from 2009 onwards to operate without any limitations until 2040. In addition, the prohibition on use of coal would not take effect immediately after the entry into force of the law. Owners are given a transition period during which they can still realize revenues from coal-fired power and limit their damage. In addition, they can use this period to investigate other uses for the power plants, and invest in conversion to biomass. Overall, a ‘fair balance’ was struck between the property rights of these energy companies, as associated with their coal-fired electricity plants, and the general public interest. The Prohibition on Coal in Electricity Production Act, demanding that companies phase out coal use by 2030, does not place an ‘individual and excessive burden’ on the energy companies.

RWE and Uniper v. the Netherlands (Ministry of Climate and Energy)

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RWE and Uniper v. the Netherlands (Ministry of Climate and Energy) - decision

Filed

Netherlands

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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

A subsidy is a direct or indirect payment to individuals or businesses, typically provided as a government cash payment or a specific tax reduction.

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.

Zoning and spatial planning are both methods for guiding the distribution of people and activities in a space, and are regulatory restriction.

A ban is a legal action that prevents the sale or supply of a product or service, or that recalls a product from the market. Examples are bans on SF6, greenwashing, fossil fuel advertisement or single-use plastics.

A company that is owned wholly or partially by the state, typically operating in key sectors.

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

A commitment to balance GHG emissions with removal by a certain point in time, effectively reducing the net emissions to zero

Aligning the skills of the workforce with the requirements of the just transition.

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

Actions or measures to adapt freshwater systems to climate change.

Actions or measures to adapt freshwater, coastal and marine systems to climate change.

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.

A potent, short-lived greehouse gas, largely released from livestock, fossil fuel extraction and waste management.

Actions to reduce emissions in energy generation and supply.

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Air pollution involves harmful contaminants in the air, affecting both indoor and outdoor environments. It can lead to health issues like respiratory diseases and heart problems, and climate impacts such as global warming. Pollutants can damage plants, trees, habitats, and water bodies like rivers and lakes.

Energy derived from biological compounds that are renewable due to their short life cycle within the carbon dioxide cycle.

Production of electricity and heat from solar irradiation.

Kinetic energy of airflow transformed into useful energy, mostly electrical energy.

Oil is a combustible liquid fossil fuel composed mainly of hydrocarbons, occurring as crude oil and refined into petroleum products such as petrol, diesel and kerosene.

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.

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

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.

Activities that involve planning, designing and building infrastructure, residential, and commercial structures.

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

This sector involves activities that impart knowledge and skills to individuals, including formal schooling, vocational training and educational support.

Activities of government agencies and institutions that provide public services, enforce laws and manage public resources.

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

Activities that involve the cultivation of crops and raising of livestock for food, fibre, and other products essential for human life and industry.

This sector involves the distribution, treatment, and conservation of water resources.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

RWE and Uniper v. the Netherlands (Ministry of Climate and Energy) - decision

Target

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance