The European Court of First Instance issued its judgement in the case of UK v Commission (Case T-178/05) on 23 November 2005. The Court has annulled the decision of the European Commission (which had declared that the UK’s proposed amendment to its National Allocation Plan (NAP) setting out the allocation of greenhouse gas emission allowances, was inadmissible), having held that the UK “was entitled to propose amendments to the plan submitted to the Commission – even though they increased the total quantity of emission allowances – after the adoption by the Commission of a decision concerning the national plan”. The Court further held that the Commission’s arguments that the proposed amendments would destabilise the market were unfounded as the amendments were proposed prior to the opening of the market and at a time when the Commission was yet to finalise NAPs for a number of other Member States.

The case arose following the Commission’s rejection of the UK’s proposed amendment to the total quantity of allowances in the UK’s National Allocation Plan (NAP) for Phase 1 (2005-2007) of the EU ETS, with the UK’s legal challenge against the European Commission being heard by the European Court of First Instance last month further to proceedings having been initiated in March of last year.

The amendment proposed by the UK last year sought an increase of around 20 million allowances to the total previously submitted within the provisional NAP, which would bring the total quantity of allowances to be allocated to installations in the UK to 756 million. However the Commission refused to consider the substance of the amendment. Legal proceedings were therefore launched by the UK against the Commission, though in the meantime the UK decided to make allocations at the previously approved total of 736 million, in order to allow operators of UK installations covered by the Scheme to start participating fully as soon as possible. While this week’s decision of the Court has been hailed as a victory for the UK, with the Commission now being obliged to consider the UK’s amended NAP, it remains to be seen whether the Commission will accept the changes.

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