The Court of Justice of the European Union confirms the registry scheme establishing the greenhouse gas emission allowance trading system
In a judgment delivered on 15 May 2025, (Metsä Fibre Oy C414/23), the Court of Justice of the European Union confirms the rules on the irrevocability of transactions and their compatibility with the right to property guaranteed by Article 17 of the Charter of Fundamental Rights.
Background:
The original case was brought by Metsä Fibre Oy, a Finnish company operating a bioproducts plant in Äänekoski, against the Finnish Energy Agency concerning greenhouse gas emission allowances. Between 2013 and 2017, Metsä Fibre surrendered allowances in accordance with European rules.
However, in 2017, the Court of Justice of the EU delivered the Schaefer Kalk judgment (C‑460/15, hereinafter the “Schaefer Kalk judgment”, EU:C:2017:29), invalidating certain provisions of the European regulation which had led to an overestimation of CO₂ emissions in certain situations, such as that of Metsä Fibre.
As a result, the Energy Agency acknowledged that approximately 115,000 allowances had been surrendered incorrectly by Metsä Fibre. However, it refused to re-enter those allowances into the company’s account because the time limits for correcting transactions in the Union registry had expired. It only authorised their carry-over to 2021, which, according to Metsä Fibre, did not allow them to be valued (e.g. by resale), as the allowances were not visible in the registry.
The company therefore brought the matter before the Helsinki Administrative Court, claiming, inter alia, infringement of property rights, unequal treatment and breach of the principle of legal certainty, arguing that it was unable to benefit fully from the corrective effect of the Schaefer Kalk judgment. It also pointed out that its plant emits very little CO₂, which makes it impossible to use these surplus allowances in the foreseeable future.
In that context, the Finnish court decided to stay the proceedings and refer the following questions to the Court of Justice of the European Union for a preliminary ruling on whether the refusal to reinstate the surplus allowances is compatible with EU law, in particular Article 17 of the Charter of Fundamental Rights (right to property).
1) Are the provisions of Articles 70 and 40 of Regulation No 389/2013, relating to the time limits for cancelling transactions and the final and irrevocable nature of those transactions, invalid in the light of the right to property enshrined in Article 17 of the Charter […] and other rights protected by that charter, in so far as those provisions preclude the return of emission allowances to the assets of Metsä Fibre Oy in a situation where the return of those allowances in excess to the Union registry resulted from the application of provisions held invalid by the judgment in Schaefer Kalk and where that undertaking cannot benefit from a positive indicative compliance status, because of the low level of emissions currently produced by the Äänekoski installation?
- If the first question is answered in the negative, are the provisions of Articles 70 and 40 of Regulation No 389/2013 applicable in a situation where the excess surrender of emission allowances to the Union registry resulted from compliance with provisions held invalid by the Schaefer Kalk judgment, and not from a transaction entered into accidentally or in error by an account holder or a national administrator acting on its behalf?
3) If the answer to the first question is in the negative and the answer to the second question is in the affirmative, is there any other means available under EU law to place Metsä Fibre Oy, as regards the use of emission allowances, in the same situation as it would have been in if the provisions held invalid by the Schaefer Kalk judgment had not existed and if that undertaking had therefore not surrendered excess allowances?
The CJEU answers the first question as follows:
The CJEU recalls that, according to Regulation No 389/2013, a transaction is irrevocable once finalised, except in the case of an error reported within a very short period of time. However, even if allowances cannot be retroactively cancelled in the registry, this does not exclude a right to compensation. Article 40(3) provides that an operator may claim restitution, recovery or compensation if the transaction subsequently proves to be unjustified, including where an EU provision is found to be invalid.
Thus, even if Metsä Fibre cannot cancel past restitutions, it may obtain equivalent compensation, for example in the form of new allowances or financial compensation, provided that this does not call into question the transaction in the registry.
Finally, the CJEU emphasises the requirement of equal treatment: a company such as Metsä Fibre, which has reduced its CO₂ emissions and therefore cannot reuse surplus allowances, cannot be disadvantaged compared to other operators who have been credited with allowances.
The CJEU then states that the answer to the first question renders any answer to the following questions unnecessary.
Conclusion of the CJEU:
The Court finds that Articles 40 and 70 of Regulation (EU) No 389/2013, relating to the finality and irrevocability of transactions in the Union Registry and to strict time limits for their cancellation, are not contrary to the right to property guaranteed by Article 17 of the Charter. Those provisions do not preclude an operator from seeking compensation for damage suffered as a result of excess allowances being surrendered following the application of a regulation that was subsequently declared invalid. Thus, rights to restitution or compensation remain open, without calling into question the legal certainty of the registry. The validity of Articles 40 and 70 is therefore confirmed.
