The Court of Justice rules on the allocation and issue of greenhouse gas emission allowance trading free of charge to aircraft operators

On 20 January 2022, the Court of Justice handed down its judgment in Case C‑165/20, ET v Bundesrepublik Deutschland, on the interpretation of Directive 2003/87/EC and the validity of Article 10(5), Article 29, Article 55(1)(a) and (3) and Article 56 of Regulation (EU) No 389/2013. The request has been made in proceedings between ET, acting as insolvency administrator of Air Berlin plc & Co. Luftverkehrs KG (“Air Berlin”), and the Bundesrepublik Deutschland (Federal Republic of Germany) concerning a decision to cease the free allocation of greenhouse gas emission allowances which had previously been granted.

After having allocated almost 28 million free greenhouse gas emission allowances to Air Berlin, following the introduction of a temporary suspension of the emissions trading obligation for certain international flights the German Emissions Trading Authority (Deutsche Emissionshandelsstelle, DEHSt) withdrew almost 9 million aviation allowances. Subsequently, Air Berlin filed a request for insolvency proceedings to be opened against it, which ended up with ET being appointed as insolvency administrator. On 28 February 2018, however, the DEHSt carried out another partial withdrawal of aviation allowances based on the fact that, before the end of 2017, Air Berlin had ceased its aviation activities, so that there was no need to issue aviation allowances for the years 2018 to 2020. Therefore, ET brought an action before the Verwaltungsgericht Berlin (Administrative Court of Berlin; the “referring court”) which, in light of the need to interpret the relevant European legislation, decided to stay the proceedings and to refer five questions to the Court of Justice for a preliminary ruling.

By its first and third questions, the referring court asked whether Articles 3e and 3f of Directive 2003/87 must be interpreted as meaning that the number of aviation allowances allocated to an aircraft operator must, in the event of cessation of that operator’s aviation activities during the trading period in question, be reduced in proportion to the part of that period during which those activities are no longer carried out.

According to the Court, the scheme for allocating aviation allowances presupposes that, on the one hand, their recipient carries out the aviation activities and that, on the other hand, those quotas are issued in yearly instalments provided that the recipient, also at the moment that those allowances are actually issued, is an aircraft operator. The performance of aviation activities subject to the to the greenhouse gas emission allowance trading scheme throughout the trading period in question, therefore, must be considered as a substantive condition for the actual issue of the yearly instalments of those allowances until the end of that period, so that where a subject ceases his activities during a trading period and thereby loses his aircraft operator status, consequently being deprived of the allowances allocated for the years during which now turn out to be devoid of aviation activity, his insolvency administrator cannot usefully rely on a breach of the principle of protection of legitimate expectations.

In the light of the answer given to the first and third questions, the Court deemed unnecessary to examine the second, fourth and fifth questions.

Marco Stillo