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EU Greenhouse Gas Rules Survive Polish Challenge

(CN) - Poland cannot claim that EU greenhouse gas regulations single out industries that use coal as fuel, the General Court ruled Thursday.

The European Commission adopted a scheme that allowed EU countries to trade their carbon dioxide emission allowances in 2003. A second decision, set to take effect this year, allocates free emission allowances to fixed industries that meet or exceed benchmarks based on averages of Europe's most energy-efficient industries.

Poland claims, however, that the regulatory scheme favors industries using low CO2-emitting fuels and violates the basic EU principle of equal treatment of industries in different situations.

The General Court disagreed, saying that different benchmarks for different fuels would do nothing to encourage a reduction in greenhouse gas emissions.

"The application of a correction factor depending on the fuel used by a product benchmark installation, as proposed by the Republic of Poland as an opportunity to correct that benchmark, would have the consequence that the number of free emission allowances allocated to such an installation would be different depending on an input, namely the fuel used by the latter," the decision states. "Under [the regulatory scheme] that number is, in principle, calculated on the basis of the product benchmark and historical activity level for the corresponding product."

It added: "The introduction of an additional factor consisting of the inclusion of the fuel used would not encourage full harmonization across the European Union of the implementing measures relating to harmonized allocation of free allowances, in the context of which the benchmark is, in principle, calculated for the products, as required in [the law], but would result in different rules because of an input for installations in the same sector or subsector. In that regard, it should also be noted that ... the legislature envisaged, in the light of the experience gathered during the first and second trading periods, establishing a more harmonized emission trading system in order to better exploit the benefits of emission trading, to avoid distortions in the internal market and to facilitate the linking of emissions trading systems."

Industries in Poland that use environmentally dirty coal are also given a larger number of free allowances under the scheme, while EU lawmakers have offered support to low-income member states with high growth potential - like Poland - to reduce their carbon footprints by 2020, the court said.

Poland moreover is merely disputing the appropriateness of the contested decision in relation to the achievement of those sub-objectives without developing its argument more thoroughly or taking into account the objectives referred to in [the scheme]," the court wrote.

"Thus, the Republic of Poland argues that installations that obtain fewer free allowances than they issue in the context of their production process, invest in technologies using the same fuel, but for which the emissions are low," it added. "However, it does not take into account the fact that those investments may also give an impetus to the development of new economic sectors that create employment."

Finding Poland's argument "too narrow," it rejected it.

"Poland has not advanced evidence to show that the determination of the benchmarks was manifestly inappropriate having regard to the objectives to be achieved," the ruling states.

The court gave Poland two months to appeal to the Court of Justice, limited to points of law only.

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