UNIVERSITY COLLEGE DUBLIN

UCD Working Papers in Law, Criminology & Socio-Legal Studies

The Polluter Pays Principle in EU Climate Law: An

Effective Tool Before the Courts?

Suzanne Kingston
Effective Nature Laws
UCD, Sutherland School of Law
suzanne.kingston@ucd.ie

Electronic copy available at: https://ssrn.com/abstract=3680025

 The Polluter Pays Principle in EU Climate Law: An Effective Tool Before the
Courts?1

Suzanne Kingston
University College Dublin
suzanne.kingston@ucd.ie

Abstract

The polluter pays principle (PPP) is often thought of as an aspirational or guiding

principle rather than one that is justiciable by courts.2 While the principle features in
many international conventions in varying formulations, it has not been recognized as a
principle of customary international law. The legal status of the PPP in EU law is
different. The PPP enjoys constitutional status: Article 191(2) of the Treaty on the
Functioning of the European Union (TFEU) enshrines the principle among the
fundamental principles of the EU’s environmental policy. This article considers the
legal status and development of the PPP in EU law, in the case-law of the Court of
Justice of the European Union (CJEU) and in EU policy, most recently in the EU’s
Green New Deal. It goes on to identify three bodies of climate-related litigation where
the PPP has been most influential to date: first, cases concerning the EU ETS and
emissions; second, cases concerning EU energy law; and third, cases concerning EU
state aid law. Some reflections are offered in conclusion about the potential role of the
PPP in other areas, including climate cases based on human and environmental rights,
and climate cases brought against private parties.

Keywords

Polluter pays principle - European Union law - Court of Justice of the EU - Green New
Deal - State aid - Emissions Trading Scheme - Human Rights - Energy Law

1. Introduction

The polluter pays principle (PPP) is often thought of as an aspirational or guiding

principle rather than one that is justiciable by courts.3 While the principle features in
many international conventions in varying formulations, it has not been recognized as a
principle of customary international law. Rather, as observed by the arbitral tribunal in
the Rhine Chlorides case, while the principle features in many bilateral and multilateral
instruments, it “operates at various levels of effectiveness”, and is not currently part of

1
Published in Climate Law 10 (1) 1-27, DOI: 10.1163/18786561-01001001
2
See Priscilla Schwartz, ‘The Polluter-pays principle’, in Ludwig Krämer and Emanuela Orlando (eds.),
Principles of Environmental Law (Cheltenham: Elgar Encyclopedia of Environmental Law, 2018),
Volume VI.
3
See Priscilla Schwartz, ‘The Polluter-pays principle’, in Ludwig Krämer and Emanuela Orlando (eds.),
Principles of Environmental Law (Cheltenham: Elgar Encyclopedia of Environmental Law, 2018),
Volume VI.
2

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“general international law”.4 This reflects the fact that, at the international level, views
on its meaning and legal status have differed. For instance, Principle 16 of the Rio
Declaration references the “approach” that the “polluter should, in principle, bear the
cost of pollution, with due regard to the public interest and without distorting
international trade and investment”. That may be contrasted with the OECD’s
affirmation that the PPP constitutes a “fundamental principle” for member countries,
requiring that the polluter “should bear the expenses” of carrying out pollution-
prevention and control measures introduced by the public authorities in those countries,
“to ensure that the environment is in an acceptable state. In other words, the cost of
these measures should be reflected in the cost of goods and services which cause
pollution in production and/or consumption”.5

The legal status of the PPP in EU law is different. The PPP enjoys constitutional status:
Article 191(2) of the Treaty on the Functioning of the European Union (TFEU)
enshrines the principle among the fundamental principles of the EU’s environmental
policy. As a constitutional concept, it ultimately falls to the Court of Justice of the
European Union (CJEU) to decide on its meaning and legal status, which it has done in
fields such as waste and water law. As shown below, the CJEU has applied the PPP in a
number of cases, while moulding it to fit the EU’s own broader constitutional values
and legislative frameworks.

Since the entry into force of the Treaty of Lisbon in 2009, those constitutional values
also now expressly mandate the EU to promote international measures to combat
climate change.6 With the EU’s reliance on economic instruments of climate policy
such as the EU ETS and rules regulating the grant of subsidies (“state aid” rules), the
CJEU has increasingly been asked to adjudicate on vital aspects of how the PPP is in
fact operationalized in EU law. After setting the scene with a discussion of the legal
status and treatment of the PPP in EU law, three bodies of climate-related litigation are
identified where the PPP has been most influential to date: first, cases concerning the
EU ETS and emissions; second, cases concerning EU energy law; and third, cases
concerning EU state aid law.7 Some reflections are offered in conclusion about the
potential role of the PPP in other areas, including climate cases based on human and
environmental rights, and climate cases brought against private parties.

2. Development and Legal Status of the PPP in EU Law

4
Case Concerning the Auditing of Accounts Between the Kingdom of the Netherlands and the French
Republic pursuant to the Additional Protocol of 25 September 1991 to the Convention on the Protection
of the Rhine Against Pollution by Chlorides of 3 December 1976, Netherlands v. France, Award, ICGJ
374 (PCA 2004), 12 March 2004, Permanent Court of Arbitration. On the status of the PPP in
international law, see Philippe Sands and Jacqueline Peel, Principles of International Environmental Law
(Cambridge: Cambridge University Press, 4th ed., 2012), at p. 240.
5
OECD Recommendation on the Implementation of the Polluter-Pays Principle C(74)223 (1974).
6
Article 191(1) TFEU.
7
See further on this topic, the contribution of Nicolas de Sadeleer to this special edition.
3

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Long before to its insertion into the EEC Treaty in 1987, the PPP was already well-
established in EU environmental policy.8 The European Commission was an early
adopter of the principle, including it in its first Environmental Action Programme of
1973, following a request from Germany detailing ten basic principles for inclusion in
an EU environmental policy, including many that are familiar today; e.g. the prevention
principle, the integration principle, as well as the PPP.9 The Action Programme led to a
Commission Communication on the PPP subsequently endorsed by the Council in a
1975 Recommendation.10 The Communication defined the PPP as meaning that,

natural or legal persons governed by public or private law who are responsible for
pollution must pay the costs of such measures as are necessary to eliminate that pollution
or to reduce it so as to comply with the standards or equivalent measures which enable
quality objectives to be met or, where there are no such objectives, so as to comply with
the standards or equivalent measures laid down by the public authorities. Consequently,
environmental protection should not in principle depend on policies which rely on grants
of aid and place the burden of combating pollution on the Community.11

By the “burden of combating pollution” was meant the financial burden thereof,
reflecting the idea that the costs of cleaning up pollution should not in principle be
borne from the EU’s own budget, as distinct from the budgets of its member states or
the funds of those private parties who caused the pollution.

That position is also expressed in TFEU Article 192(4), which provides that “without
prejudice to certain measures adopted by the Union”, the member states are to finance
and implement the EU’s environmental policy. An important limitation on this principle
is added by TFEU Article 192(5), enabling derogation from member states’ TFEU
Article 192(4) obligations, or financial support from the EU’s Cohesion Fund, if
national authorities are faced with costs “deemed disproportionate”. While this
provision is expressed to be “without prejudice to” the PPP, it implies that, as a matter
of EU constitutional law, member states will not be responsible for the costs of cleaning
up pollution in their own jurisdiction where such costs are “deemed” disproportionate.

This position is consistent with the case law of the CJEU, where it has held the PPP to
constitute a reflection of the general principle of proportionality in EU law. Applying
the PPP in the context of the EU’s Nitrates Directive, which sets limits on nitrates
discharged by, among others, farmers, the CJEU held that member states must

8
See generally, Suzanne Kingston, Aleksandra Čavoški, and Veerle Heyvaert, European Environmental
Law (Cambridge: Cambridge University Press, 2017), at p. 100. See further, Nicolas de Sadeleer, ‘The
Polluter-pays Principle in EU Law: Bold Case Law and Poor Harmonisation’, in Pro Natura: Festskift til
H.-C.Bugge (Oslo: Universiteitsforlaget, 2012) 405.
9
OJ 1973 C 112/1. See Ludwig Krämer, ‘The genesis of EC environmental principles’, College of
Europe, Research Papers in Law, 7/2003 (2003).
10
Council Recommendation 75/436/Euratom, ECSC, EEC regarding cost allocation and action by public
authorities on environmental matters OJ 1975 L 194/1
11
Ibid., Annex, point 2.
4

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 take account of the other sources of pollution when implementing the Directive and,
having regard to the circumstances, are not to impose on farmers costs of eliminating
pollution that are unnecessary. Viewed in that light, the polluter-pays principle reflects
the principle of proportionality.12

In the context of the EU’s Cohesion Fund, this has meant that EU regions that are
relatively poorer have received significant funds for assistance with cleaning up
pollution in their jurisdiction, through the EU’s cohesion policy. In the climate context,
this approach has most recently been exemplified by the EU’s European Green Deal
Investment Plan, announced in January 2020 by the Von der Leyen Commission,
discussed below.

Reflecting its constitutional status, the PPP has enjoyed significant influence in EU
legislation since its insertion into the Treaty.13 Its influence has been clear in the EU’s
embrace of economic, market-based environmental-policy instruments aimed at placing
a price on pollution and passing on that price, where possible, to those who have caused
the pollution. This was clearly signalled in the Commission’s 2007 Green Paper on
Market-Based Instruments for Environment and Related Policy Purposes,14 which noted
that the EU had increasingly favoured economic or market-based instruments, such as
indirect taxation, targeted subsidies, or tradable emission rights for environmental-
policy purposes because “they provide a flexible and cost-effective means for reaching
given policy objectives”.15 This in turn reflected the EU’s Sixth Environmental Action
Programme, which set the EU’s environmental policy framework for 2002-2012, a key
aspect of which was the use of “a blend of instruments, including market based and
economic instruments” to internalize negative externalities, via reforms to “gradually
eliminate” subsidies that are environmentally harmful, promoting tradable permits “as a
generic instrument” as well as emission trading, and promoting the use of
environmental taxes and incentives.16

As concerns emission trading, it was widely considered that the original design of the
EU ETS, largely based on the approach of free allocation of allowances through
grandfathering, did not properly implement the PPP.17 One of the main criticisms of
Phase I of the ETS was the fact that it led to windfall profits for large carbon emitters,
by granting free allowances, contrary to the PPP. This led to national measures seeking

12
Case C-293/97, The Queen v. Secretary of State for the Environment and Ministry of Agriculture,
Fisheries and Food, ex parte H.A. Standley and Others ECLI:EU:C:1999:215, at paragraph 52.
13
The principle was inserted into the Treaty establishing the European Economic Community, as it was
then entitled, by the Single European Act which came into force in 1987.
14
COM (2007) 140.
15
Ibid., at p. 1.
16
Decision No 1600/2002/EC of the European Parliament and of the Council of 22 July 2002 laying
down the Sixth Community Environment Action Programme OJ 2002 L 242/1.
17
See for instance, the argument of Jonathan Nash in “Too Much Market? Conflict between Tradable
Pollution Allowances and the “Polluter Pays” Principle” 24(2) Harvard Environmental Law Review 1
(2000). For a nuanced discussion, see Edwin Woerdman, Alessandra Arcuri and Stefano Clò, “Emissions
Trading and the Polluter-Pays Principle: Do Polluters Pay under Grandfathering?” 4:2 Review of Law and
Economics 565 (2008).
5

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to counteract the windfall effects, some of which were challenged before the CJEU, as
discussed below. Clearly, the move to auctioning as the default method of allocating
allowances, and the gradual phasing out of grandfathering in Phases III and IV of the
ETS,18 has significantly improved the compatibility of the ETS with the PPP. As the
European Commission has emphasized, auctioning “puts into practice the principle that
the polluter should pay”.19 The 2009 amendment to the ETS, which established full
auctioning as “the rule” from 2013 onward for the power sector, and eliminates free
allocation for carbon capture and storage in this sector,20 is a vital aspect of this change.
However, exceptions to the principle of auctioning still exist in the ETS, most notably
in those sectors deemed by the European Commission as exposed to carbon leakage
pursuant to Articles 10(a) and (b) of the ETS Directive.

The influence of the PPP has been most explicit to date in the CJEU’s case law on EU
waste legislation and on the Environmental Liability Directive (ELD).21 EU waste
legislation incorporates the principle by requiring the cost of disposing of waste to be
borne by the waste producer or by the current or previous waste holders.22 The CJEU
has adopted a broad approach to the PPP in this context, confirming that it is the person
or persons who “cause the waste” who are financially liable for the cost of disposal,
“whether they are holders or former holders of the waste or even producers of the
product from which the waste came”.23 In Mesquer, which arose out of the 1999 Erika
oil-spillage disaster off the coast of Brittany, the CJEU held that, where national law did
not permit a shipowner or charterer to be held liable for the clean-up costs (due, in that
case, to international agreements that excluded such liability), the PPP nevertheless
required that the costs must be borne by the producer of the product.24 However, the
CJEU limited this by noting that, in accordance with the PPP, “such a producer cannot
be liable to bear that cost unless he has contributed by his conduct to the risk that the
pollution caused by the shipwreck will occur”.25 The practical and evidential difficulties

18
Running from 2013 – 2020 and 2021 – 2030, respectively.
19
European Commission, https://ec.europa.eu/clima/policies/ets/auctioning_en (accessed January 16,
2020).
20
Directive 2009/29/EC OJ 2009 L140/63, Preamble, recital (19) and Article 10a.
21
The PPP is also expressly incorporated into EU water law, which requires Member States to take
account of the principle of “recovery of the costs of water services”, in accordance with the PPP. See Art.
9 of Directive 2000/60/EC of the European Parliament and of the Council establishing a framework for
the Community action in the field of water policy, OJ 2000 L 327/1.
22
See the Waste Framework Directive 2008/98/EC Directive 2008/98/EC of the European Parliament and
of the Council of 19 November 2008 on waste and repealing certain Directives OJ 2008 L 312/3, Art. 14
(“In accordance with the polluter-pays principle, the costs of waste management shall be borne by the
original waste producer or by the current or previous waste holders”). Member States are, however, left
with considerable discretion as to how to measure the costs of waste disposal: see Case C-254/08 Futura
Immobiliare ECLI:EU:C:2009:479.
23
Case C-1/03 Van de Walle ECLI:EU:C:2004:490, paragraph 58.
24
Case C-188/07 Commune de Mesquer ECLI:EU:C:2008:359. See the case-note of Nicolas de Sadeleer
at (2009) 21/2 Journal of Environmental Law 299.
25
Ibid, paragraph 82.
6

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in establishing the extent of causation in such circumstances did not deter the CJEU
from reinforcing the importance of the PPP in that case.26

The CJEU has also frequently interpreted and applied the PPP in cases arising under the
ELD, which is based on the principle that an operator whose activity has caused
environmental damage or the imminent threat of such damage is to be held financially
liable.27 However, the ELD applies only to certain defined activities, such as large
industrial installations already subject to the EU’s industrial-licensing regime and to
waste-management operations subject to the EU’s waste legislation.28 National public
authorities are placed at the centre of enforcing civil sanctions for breach of EU
environmental law and are given responsibility for ensuring that the operators covered
by the ELD prevent or, as the case may be, remedy relevant environmental damage
falling within its scope.29

In Raffinerie Mediterranée, the CJEU applied the PPP to hold that a competent
authority must have “plausible evidence” capable of justifying a presumption that a
particular operator had in fact caused the pollution at issue.30 In Fipa Group, the CJEU
held that it was compatible with the PPP for national legislation to prohibit national
authorities from making a landowner adopt preventative and remedial measures in a
situation where the landowner did not cause the pollution and where it is impossible to
identify who the polluter is or to require an identified polluter to remedy the pollution.
The CJEU also held that the competent authority may require an identified polluting
landowner to reimburse the costs of measures undertaken by the national authority,
limited “within the market value of the site”.31

In Fipa, the CJEU held that individuals may rely on the PPP in TFEU Article 191(2)
against EU member states only where EU legislation has been passed on the basis of the
environmental provisions of the EU Treaty (known in EU law as the environmental
“legal basis”: TFEU Article 192).32 This does not mean, however, that the PPP is not

2626
The oil company, Total, was ultimately found to be criminally liable as a matter of French law for the
damage caused, including, as a matter of French law, for the ecological damage (“préjudice écologique”)
caused. See generally Patrick Thieffry (ed.), La responsabilité du producteur du fait des déchets
(Brussels: Bruylant, 2012).
27
Directive 2004/35/EC on environmental liability with regard to the prevention and remedying of
environmental damage OJ 2004 L 143/56.
28
Ibid, Annex III.
29
The public law nature of the ELD is underscored by Article 3(3) ELD, which expressly states that it
does not give private parties any right of compensation as a result of environmental damage or an
imminent threat of such damage.
30
Case C-379/08 Raffinerie Mediterranée ECLI:EU:C:2010:127.
31
Case C-534/13 Ministero dell’Ambiente e della Tutela del Territorio e del Mare and Others v Fipa
Group srl ECLI:EU:C:2015:140.
32
“Article 191(2) TFEU provides that EU policy on the environment is to aim at a high level of
protection and is to be based, inter alia, on the ‘polluter pays’ principle. That provision thus does no more
than define the general environmental objectives of the European Union, since Article 192 TFEU confers
on the European Parliament and the Council of the European Union, acting in accordance with the
ordinary legislative procedure, responsibility for deciding what action is to be taken in order to attain
those objectives […]. Consequently, since Article 191(2) TFEU, which establishes the ‘polluter pays’
7

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justiciable before EU courts: the judgment confirms that the PPP may be relied upon
against EU institutions where the applicable legislation has been adopted on the basis of
TFEU Article 192. This is clearly important in assessing the relevance of the PPP for
EU climate law, since much of the legislation passed of relevance to EU climate policy
is based on the environmental legal basis of the TFEU.33 However, it should be noted
that not all climate-relevant legislation is based on Article 192 TFEU: in particular, the
most recent amendment to the TFEU, made by the Treaty of Lisbon, inserted a new
legal basis into the Treaty specific to energy legislation, Article 194 TFEU. In addition,
even if it is not possible to rely on the PPP to disapply national legislation in the
absence of EU legislation on the matter, the principle may nevertheless be relied upon
as an interpretative aid as long as national or EU legislation exists governing the area.

EU legislation has given less weight to the PPP in other contexts. For example, the
Habitats Directive states that the PPP can “have only limited application in the special
case of nature conservation” in justifying the principle that certain member states may
receive EU financial assistance in satisfying certain obligations under the Directive.34
This exceptional position was the compromise reached when Spain and Germany were
on opposite sides of an entrenched dispute regarding the fundamental principle of
whether a directive should provide on its face for EU funding to be available to comply
with obligations under that directive—a dispute that very nearly led to the Habitats
Directive proposal being withdrawn after more than three years of negotiations.35 For
this reason, the dilution of the PPP in the field of nature conservation may be considered
an anomaly arising out of the unique facts of the Habitats Directive’s negotiation.

In 2019, the Von der Leyen Commission announced the European Green Deal (EGD)—
its flagship policy on the green economy. The PPP’s role in it is on its face ambiguous.
An important element of the EGD is its Green Deal Investment Plan, stated by the
Commission to be the EU’s “response to the climate and environmental-related
challenges that are this generation’s defining task”.36 In turn, an important element of
the Plan is the Just Transition Mechanism, which is to provide funds of over €100
billion for investments aimed at “making sure no one is left behind” in achieving the

principle, is directed at action at EU level, that provision cannot be relied on as such by individuals in
order to exclude the application of national legislation — such as that at issue in the main proceedings —
in an area covered by environmental policy for which there is no EU legislation adopted on the basis of
Article 192 TFEU that specifically covers the situation in question […]. Similarly, the competent
environmental authorities cannot rely on Article 191(2) TFEU, in the absence of any national legal basis,
for the purposes of imposing preventive and remedial measures.” Ibid, at paragraphs 39 - 41.
33
It is notable that, while the ELD does make specific reference to the PPP, the CJEU in its remarks on
the PPP’s legal status in Fipa does not state it to be essential that the EU legislation at issue makes such
express reference in order for the PPP to be relevant. That the PPP is relevant to all EU environmental
legislation is confirmed by the ETS case-law discussed below.
34
Directive 92/42/EEC on the conservation of natural habitats and of wild fauna and flora OJ 1992 L
206/7, Preamble.
35
See Andrew Jackson, Conserving Europe’s Wildlife: Law and Policy of the Natura 2000 Network of
Protected Areas (Abingdon: Routledge, 2018), chapter 9.
36
Communication from the Commission “Sustainable European Investment Plan – European Green Deal
Investment Plan” COM (2020) 21, at p. 1.
8

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EU’s goal of becoming climate-neutral by 2050.37 This is to be part of a broader
investment of over €1 trillion by 2030.38 A central feature of the Just Transition
Mechanism will be the provision of financial assistance to territories with high
employment in coal, lignite, oil shale, and peat production, as well as territories with
other greenhouse-gas-intensive industries.39 The Commission further indicates that the
transformation to a low-carbon economy may require additional investments of up to 2
per cent of GDP by 2040, and that this figure may itself need to be raised by 2030.40

On one view, the EU’s Green Deal Investment Plan might suggest that the PPP is
receding in importance as a principle of EU environmental law. It could be argued that,
in the face of the existential and exceptional threat posed by climate change, the EU is
relieving those member states responsible for higher emissions, and private actors
engaged in emission-intensive industries, from their responsibility to “pay”. The Plan’s
approach rests however on an exclusively internal view of the identification of the
“polluter” and of who, or what, should “pay” for the damage caused by climate change
and to prevent such damage. Viewed from an external and global perspective, the Plan
can be seen as the EU’s recognition, as a bloc, of its collective responsibility to pay for
at least some of the costs of tackling climate change, a problem for which it or its
constituent members bear significant responsibility.41 In this sense, the Plan may be
seen not as an abdication of the PPP but as an (imperfect) expression of its application
on the international stage.

Nevertheless, aspects of the Plan are not fully in line with traditionally accepted
conceptions of the PPP set out above. An example is the Plan’s encouragement of
“sustainable investments” via an announced revision of the EU’s Environmental and
Energy State Aid Guidelines, which will give member states greater scope to grant
subsidies to companies in order to promote climate-friendly investments and
activities.42 That revision is to take place by 2021.43 The idea of granting subsidies for
better environmental performance has from the outset been recognized as contrary to
the PPP. It has, nevertheless, formed a vital part of EU environmental policy for over
twenty-five years, since the publication of the EU’s first Guidelines on state aid for

37
Ibid, at p. 2.
38
Ibid, at p. 5.
39
Ibid, at p. 19.
40
Ibid, at p. 4.
41
See, for instance, Marcia Rocha, Mario Krapp, Johannes Guetschow, Louise Jeffery, Bill Hare, Michiel
Schaeffer, “Historical Responsibility for Climate Change – from countries’ emissions to contribution to
temperature increase” (2015),
https://climateanalytics.org/media/historical_responsibility_report_nov_2015.pdf, who show that the
EU28 were responsible for some 17% of the world’s emissions of the Kyoto greenhouse gases in the
period 1850 to 2012; also see Olga Alcaraz, Pablo Buenestado, Beatriz Escribano, Bárbara Sureda, Albert
Turon and Josep Xercavins, “Distributing the Global Carbon Budget with climate justice criteria” 149
Climatic Change 131 (2018), who note that the EU’s cumulative emissions between 1971 and 2010 form
18.7% of the total global emissions during this period.
42
Supra note 33, at p. 12.
43
The practical import of this announcement is limited, as revised Guidelines were due in 2021 in any
event.
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environmental protection, in 1994,44 which acknowledged that environmental subsidies
are “a second-best solution in situations where the polluter pays principle—which
requires all environmental costs to be ‘internalized’, i.e. absorbed in firms’ production
costs—is not yet fully applied”.45 The current version of the Guidelines places a
significant limitation on the scope of the PPP in the state-aid context, noting that

Respect for the ... PPP ... through environmental legislation ensures in principle that the
market failure linked to negative externalities will be rectified. Therefore, State aid is not
an appropriate instrument and cannot be granted insofar as the beneficiary of the aid
could be held liable for the pollution under existing Union or national law.46

The renewed emphasis on the importance of state aid in the Green Deal Investment Plan
makes it clear that state aid will remain an important part of the EU policy mix despite
being a “second-best” solution. The EU’s state-aid policy therefore illustrates the fact
that EU environmental law as it stands implements the PPP only imperfectly, and there
are many situations where society at large ends up bearing the cost of pollution caused
by a sub-section of the population. For instance, under the EU’s Guidelines, it is still
permissible for the state to subsidize a company’s waste management, and even for the
state to grant subsidies to environmentally damaging activities, as long as the conditions
set out in TFEU Article 107 are met.47

3. The PPP: A Potential Tool in EU Climate-Related Litigation?

Against this context, we turn to consider the role and prospects of the PPP in climate-
related litigation. For the present analysis a broad definition of climate-related litigation
is adopted, encompassing litigation concerning an EU climate-related legal instrument.
Much of the climate litigation literature to date has focused on a narrower sub-category
of litigation, namely litigation brought by NGOs or individuals seeking to hold states or
other entities legally accountable for, or seeking to require greater action on, climate
change.48 Recognizing the vital importance of such cases, I seek to broaden the
discussion in the context of the PPP. To date, the influence of the PPP has been most
evident not in rights-based climate cases but in cases concerning the EU ETS and
emission legislation, EU energy law, and EU state-aid law.

3.1. EU ETS and Emission-Related Litigation

44
OJ 1994 C 72/3.
45
Ibid, at paragraph 1.4. In the interim years, the Guidelines (in their revised forms) have grown from 6
pages to some 49 pages in length, including a substantial section on aid for climate purposes.
46
Commission Communication, Guidelines on State aid for environmental protection and energy 2014 –
2020 OJ 2014 C 200/1, at (44), emphasis added.
47
Commission Communication, Guidelines on State aid for environmental protection and energy 2014-
2020, OJ 2014, C 200/1, paras. 6 and 158-159 (namely para. 156 noting the polluter pays principle).
48
As Setzer and Vanhala have noted, the lion’s share of climate litigation activity in fact concerns not this
sub-category but rather the many “everyday” cases dealing with other climate-related matters such as the
ETS. Joana Setzer and Lisa C. Vanhala, “Climate change litigation: A review of research on courts and
litigants in climate governance” 10:e580 WIREs Clim. Change (2019), at p. 3.
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There is now a large body of CJEU case law concerning the EU ETS; a significant
portion of this is of relevance to the PPP. The first generation of EU ETS cases
comprised member state challenges to Commission decisions on their national
allocation plans (NAPs) proposed for Phases I and II. While these cases are of less
direct practical significance with regard to the post-Phase II regulatory framework
where allowance allocation is centralized, the CJEU demonstrated a willingness to step
in and exercise judicial control over the Commission’s decisions on approving
individual NAPs on the basis of general principles of EU law, such as equal treatment
and the duty to give reasons.49

In Arcelor, in upholding the validity of the 2003 ETS Directive, the CJEU recalled that
the Directive formed part of the EU’s environmental legislation which was based inter
alia on the PPP.50 The fact that only certain sectors were subject to the ETS (as was the
applicant’s sector, which was steel) did not infringe the principle of equal treatment, in
light of the “step-by-step” approach on which the Directive was based and the EU
legislature’s intention to define the Directive’s scope “in such a way as not to upset the
administrative feasibility of the allowance trading scheme in its initial stage by
involving too many participants”.51 In that case, therefore, the CJEU acknowledged the
practical realities of instituting a novel economic instrument such as the ETS, and
applied the PPP, together with the principle of equal treatment, in a nuanced manner,
rejecting an all-or-nothing approach to the ETS’s scope.

The PPP has also arisen in cases on the Phase III regulatory framework. One of the first
was the General Court’s 2013 judgment in Poland v. Commission, in which Poland
sought unsuccessfully to challenge the Commission’s decision on the transitional
measures for harmonized free allocation of allowances, taken pursuant to Article 10(a)
of the ETS Directive.52 In rejecting Poland’s arguments that the Commission had not
sufficiently taken into account differences between member states and regions (in
particular, a Polish dependency on coal) and had gone beyond what was necessary to
achieve the directive’s aims, the General Court distinguished its Phase I/II judgments on
the basis that, in those phases, the margin of discretion left to member states in
transposing the ETS Directive was far greater.53

Similarly, in Iberdrola,54 the CJEU held that a Spanish law aimed at reducing the
windfall profits earned by electricity producers was compatible with the 2003 ETS
Directive, whereby free allocation of allowances was, as discussed above, the norm. In
reaching this conclusion, the CJEU emphasized that the concept of free allocation of
49
See, e.g., Case T-183/07 Poland v Commission ECLI:EU:T:2009:350 (Commission reduction of
industry emission caps by 26.7 per cent annulled – appeal to CJEU dismissed March 2012 in Case C-
504/09 P;) Case T-263/07 Estonia v Commission ECLI:EU:T:2009:351 (Commission reduction of
industry emission caps by 47.8 per cent annulled – appeal to CJEU dismissed March 2012 in Case C-
505/09 P).
50
Case C-127/07 Arcelor ECLI:EU:C:2008:728, paragraph 30.
51
Ibid, paragraph 71.
52
Case T-370/11 Poland v Commission ECLI:EU:T:2013:113.
53
Ibid, §§52 – 53.
54
Case C-566/11 ECLI:EU:C:2013:660.
11

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allowances was not directly related to the ETS’s environmental aims, and that the
Spanish rules did not affect the functioning of the allowances market, but only the level
of profit of the electricity producers, and did not compromise the environmental aims of
the ETS.55 The CJEU accepted the electricity producers’ claim that the way that the
Spanish scheme worked in fact could, in some cases, reduce the incentive to reduce
greenhouse gas emissions, but held that this did not mean the scheme was contrary to
the ETS Directive, as long as it did not “remove that incentive entirely”.56 The case
illustrates, therefore, the CJEU’s acceptance that environmental markets do not always
work perfectly, and that for Spain to seek to reduce the distortive effects of free
allocation of allowances (and thus better implement the PPP) was compatible with the
overall environmental objectives of the ETS.

However, in ŠKO-ENERGO,57 the CJEU observed that member states may lawfully
adopt measures that may make freely allocated allowances more costly, but such
measures must not neutralize the basic principle of free allocation of allowances that
was then applicable, or undermine the Directive’s aims. In that case, a Czech law
imposing a gift tax of 32 per cent on freely allocated emission allowances, with an
exemption for photovoltaic power stations, was held in principle to be contrary to the
Directive, as it compromised that basic principle (although this was ultimately for the
national court to decide).

In Billerud,58 the applicant had failed to surrender allowances by the date set down in
the ETS Directive and therefore was subject to a penalty. The applicant argued however
that the PPP should be applied to mean that no penalty should be imposed, because
although it had breached the obligation to surrender on time, in fact it held the requisite
number of allowances; therefore it had not caused any excessive emissions in reality.
The CJEU rejected that argument, recalling that the ETS was based on a strict
accounting system involving the issue, holding, transfer, and cancellation of allowances.
The concept of “polluter” in the PPP must be interpreted in the light of this aim, as the
Directive

has as its object and effect to penalise not “polluters” generally, but rather those operators
whose number of emissions for the preceding year exceeds, as at 30 April of the current
year, the number of allowances listed in the section of the surrendered allowance table
designated for their installations for that year in the centralised registry of the Member
State to which they report under Article 52 of Regulation No 2216/2004. This—and not
the emissions which are per se excessive—is how the concept of “excess emissions” is to
be construed.59

Billerud confirms therefore that the CJEU’s interpretation of the meaning of the PPP
will be informed by the applicable regulatory context, and there is no one-size-fits-all

55
Op. cit., §§35-58.
56
Ibid, §58.
57
Case C-43/14 ECLI:EU:C:2015:120.
58
Case C-203/12 ECLI:EU:C:2013:664.
59
Ibid, §28.
12

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approach. Furthermore, the CJEU rejected the applicant’s argument that it should be
open to a national court to vary, on proportionality grounds, the amount of lump-sum
penalty (at the time, €40 per tonne of CO2 equivalent) imposed for failure to surrender
allowances. The CJEU reasoned that the EU legislature had viewed the lump sum
payment as necessary in pursuit of the legitimate objective of establishing an efficient
ETS, and in particular to prevent manipulation or circumvention of the scheme. The
CJEU deferred to that view, having regard to the fact that most allowances had been
allocated free of charge in Phase I. In effect, therefore, the CJEU gave priority to the
effectiveness of the ETS over the application of the principle of proportionality (which,
as discussed above, underpins the PPP) in the case of penalties for non-surrender.

A final EU ETS judgment of relevance is the ATAA judgment,60 where a challenge by

the Air Transport Association of America and a number of US airlines to the inclusion
of third-country airlines within the scope of the ETS failed. The CJEU held that the
application of the EU ETS to third-country airlines was compatible with international
law and, in particular, with the principle of territoriality, given that the scheme only
applies to commercial aircraft that arrive at or depart from an airport in a member
state.61 While the EU ETS applied to the whole of the aircraft’s journey (not just that
which occurred over EU territory), this was compatible with the territoriality principle
given the EU’s objective under TFEU Article 191(2) to achieve a high level of
environmental protection and its status as a party to the UNFCCC.62 Advocate-General
Kokott noted in her Opinion that:

Under the EU emissions trading scheme a particular airline may be required, when
departing from or arriving at a European aerodrome, to surrender emission allowances
that are higher the further the point of departure is from the destination. Taking account
of the whole length of the flight is ultimately an expression of the principle of
proportionality and reflects the “polluter pays” principle of environmental law.63

The CJEU’s judgment was highly controversial, and led to a dispute within the
International Civil Aviation Organization, leading in turn to the EU’s 2013 decision to
“stop the clock” on the application of the ETS to flights between EU airports and third
countries and its 2017 decision to limit the application of the ETS to intra-EEA flights
through to, and until, 2024,64 in light of the ICAO’s 2016 Resolution on a global
market-based measure to address emissions from international aviation as of 202165 and
its proposed adoption of the offsetting system, CORSIA. The ATAA judgment illustrates
the limitations of judges and litigation in implementing the PPP in a global climate
context, and in one sense it was a pyrrhic victory for the EU legislators. Nevertheless,

60
Case C-366/10 ATAA ECLI:EU:C:2011:864.
61
Ibid., §127.
62
Ibid, §128.
63
At para. 153, emphasis added.
64
Regulation (EU) 2017/2392 of the European Parliament and of the Council of 13 December 2017
amending Directive 2003/87/EC to continue current limitations of scope for aviation activities and to
prepare to implement a global market-based measure from 2021 OJ 2017 L 350/7.
65
ICAO Assembly, Report of the Executive Committee on Agenda Item 22, A.39-WP/530 (2016).
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the judgment has provided a form of legal support for the EU’s global climate efforts in
the aviation sector.

Outside the ETS context, in the 2019 judgment in Poland v. Commission,66 Poland had
sought to annul the EU Directive on the reduction of national emissions of certain
atmospheric pollutants, including sulphur dioxide, nitrogen oxides, and non-methane
volatile organic compounds.67 The Directive established national limits for
anthropogenic emissions of the gases in question up to 2030 and was stated to have
health, climate, and more general environmental aims. Poland, supported by Hungary
and Romania, took issue with the way in which the national limits had been set, and
claimed before the CJEU that the economic cost of emission reductions for their states
had not been properly assessed. Poland further argued that its national limits were more
onerous than those for other member states, which was disproportionate. The CJEU
rejected these claims, pointing out that a detailed impact assessment had considered the
economic costs of the limits. It accepted the EU institutions’ argument that the systems
they had relied upon (including the GAINS system of the International Institute for
Applied Systems Analysis, acting as a consultant to the Commission) had made it

possible to examine cost-effective emission control strategies by replicating as far as

possible historic emissions and by establishing, on that basis, projections of emissions of
certain air pollutants for each country. The data used for that purpose are taken from
international energy and industry statistics, emission inventories and data supplied by the
countries concerned themselves.68

The CJEU further noted that the data used were available to member states, which could
identify the specific assumptions made in respect of their situation. Accordingly, the
CJEU held that the EU Parliament and Council had correctly taken into account the
available scientific data and information in order to exercise their discretion under the
Directive to set the appropriate limits.69 Moreover, the CJEU held that the process
applied had been transparent, as Poland had access to the full set of documents relied
upon as the “basic facts”, which had been taken into account by the EU legislature.70
The CJEU held that it was not open to a member state to claim an unlimited right of
access to documents, such that it could “in all circumstances” require access to
documents allegedly missing in order to block the legislative process.71

Finally, on Poland’s substantive claim that the reductions it was being asked to achieve
were disproportionately high, the CJEU held that the principle of proportionality had
not been breached, as it was apparent from the impact assessment that “the distribution

66
Case C-128/17 Poland v Commission ECLI:EU:C:2019:194.
67
Directive (EU) 2016/2284 of the European Parliament and of the Council of 14 December 2016 on the
reduction of national emissions of certain atmospheric pollutants, amending Directive 2003/35/EC and
repealing Directive 2001/81/EC OJ 2016 L 344/1.
68
Ibid., at para. 35.
69
Ibid, at paragraph 45.
70
Ibid, paragraph 73.
71
Ibid, paragraph 74.
14

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of effort between Member States is not obviously imbalanced”. While Sweden required
a lower proportion of GDP to be invested in order to reach its targets, this

reflects both the different levels of GDP within the European Union and the efforts
already made in some Member States. The Council rightly points out in this regard that
the link between the historical level of emissions and the level of effort required under the
contested directive is consistent with the polluter-pays principle.72

The CJEU also rejected Poland’s arguments that insufficient account had been taken of
the transboundary nature of the pollution, meaning that some pollution was being
caused by Ukraine and Belarus and not by Poland, which it argued led to unequal
treatment of the member states bordering non-member countries and was at odds with
the PPP.73 The CJEU rejected this argument on the basis that the EU legislature had
demonstrably taken into account

extensive data when it adopted the contested directive, including information on the cost
of implementing the directive in each Member State and the resulting benefits. It also
made a choice between several options in order to select the option that was likely to
generate the greatest net benefit. Furthermore, as has already been pointed out [...] the EU
legislature took proper account of the emission reduction potential in each of the Member
States and sought a balanced distribution of efforts between them.74

The CJEU held that the EU legislature had therefore fulfilled its obligations under the
TFEU, for on the basis of the available scientific and technical data it had taken account
of the balanced development of the European Union and its regions, particularly by
factoring in the costs of implementing the contested directive in each member
state and the benefits likely to result from it. Accordingly, the CJEU rejected Poland’s
claim in its entirety.

The judgment is important as it shows that, while the CJEU is amenable to arguments
based on the PPP in emission legislation, it will not second-guess the EU legislature on
detailed cost-benefit analyses. Instead, it will verify whether the evidence before it
shows that the legislature’s decision was in accordance with best scientific evidence.
Notably, the CJEU took the PPP into account, and the different levels of environmental
effort by different states, in upholding differential targets for them. This illustrates the
likely approach of the CJEU if faced with arguments based on differential obligations in
the context of other climate-related litigation in the future.

3.2. Energy Litigation

72
Ibid, paragraph 113, emphasis added. Moreover, Poland had not given sufficient consideration in its
arguments to the benefits of the measure, and had not discharged its burden of proof to show that the
commitments go beyond what is necessary in the light of the objectives of the contested directive, or that
less onerous commitments could have been used to achieve them.
73
Ibid, paragraph 123.
74
Ibid, paragraphs 136 - 138.
15

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The role of the PPP has also arisen in a number of important climate-related cases
concerning EU energy law. In its 2019 judgment in UNESA,75 the CJEU considered the
interaction of the PPP with the EU’s 2009 Electricity Directive, and the extent to which
the non-discrimination provisions contained in Article 3(1) of that Directive could be
said to apply to a national green taxation measure. The relevant portion of that Article
provides that: “4. Member States shall ensure that any measures adopted in accordance
with this Directive are non-discriminatory and do not place an unreasonable burden on
the market actors, including market entrants and companies with small market shares.”

In 2012, Spain introduced a tax on the production of spent nuclear fuel and radioactive
waste in nuclear installations and on their storage in central facilities in order to offset
the costs that society has to bear. The applicants in the proceedings were companies
producing electricity originating from nuclear sources (among others). They brought
proceedings before the Spanish High Court challenging the tax on the basis that it
amounted to a form of special taxation on nuclear-energy producers that was
discriminatory and unlawful under national constitutional law and EU law. Specifically,
the applicants argued that the tax did not have any consistent environmental
justification, as other electricity producers were as polluting as those relying on nuclear
sources, and there was no requirement that the revenue to be raised from the levy was to
be used for environmental-protection purposes. The applicants also pointed out that the
nuclear industry was already subject to liability in the form of a requirement to assume
civil liability of up to €1,200 million.

The matter ultimately went on appeal before the Spanish Supreme Court, which referred
it to the CJEU by means of the preliminary ruling procedure under TFEU Article 267.
The Spanish court asked the CJEU a number of questions concerning the PPP, including
whether the PPP and the principles of non-discrimination and equality under EU law,
when applied to Article 3(1) of the Electricity Directive, precluded the introduction of
taxation applying solely to electricity-generation companies using nuclear energy,
where the main purpose of the tax was not environmental but one of increasing the
funds generated from electricity-power generation.

Applying the principles discussed above in the context of the Fipa judgment, the CJEU
held that the PPP could not be relied upon directly to challenge the Spanish levy, as the
Electricity Directive was not based on the environmental legal basis in the Treaty,
TFEU Article 192, but rather on a different Treaty legal basis, which is aimed at
achieving the internal market in the EU (TFEU Article 114). To that extent, the
questions posed by the referring court were inadmissible. In addition, the CJEU held
that Article 3 of the Electricity Directive did not apply to tax measures (the passage of
which requires unanimity of voting in the Council as a matter of EU law), and hence the
Directive did not preclude the Spanish law at issue—and the Spanish court had not
proposed how the tax could otherwise fall within the scope of EU law. The matter
therefore reverted to the Spanish court, to be decided on the basis of domestic law.

75
Joined Cases C-80/18 to C-83/18 ECLI:EU:C:2019:934.
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UNESA demonstrates, therefore, that where the question of compatibility of a national
measure with a non-environmental Directive is raised, the PPP cannot be relied upon to
mount an argument against that member state. Notably, the CJEU in its judgment
reached a different view from Advocate-General Hogan, who would have considered
the matter admissible and who observed that “nuclear energy is not in a comparable
situation to other sources of electricity with regard to environmental protection, due to
the specific health and safety risks involved, in particular, in the treatment and storage
of the nuclear waste it generates”.76 He went on to raise “serious doubts” about whether
a nuclear levy that was aimed at raising money rather than environmental protection
would be objectively justified and reasonable.77

In other cases, while not expressly referencing the PPP, the CJEU has applied a clear
proportionality-based approach to national energy measures aimed at promoting green
energy, in particular in reconciling such measures with the other fundamental principles
of the EU Treaties, including free movement of goods and equal treatment.

In Vindkraft,78 the CJEU was asked to consider the compatibility of Sweden’s

implementation of the EU’s 2009 renewable energy (RES) Directive with the Treaty-
based free movement of goods provisions.79 The RES Directive was an important part
of the EU’s 2009 Climate and Energy Package, setting mandatory individual national
targets for member states with the aim of reaching a 20 per cent EU-wide share of
energy from renewable sources by 2020 overall, and a mandatory 10 per cent target for
each member state in the transport sector.80 (Mandatory national renewables targets
have been removed from the EU’s 2030 Climate and Energy Strategy.)

The applicant in Vindkraft was a wind farm located in Finland which had sought and
was refused approval from the Swedish Energy Agency to be awarded green electricity
certificates for the energy that it produced. The applicant challenged this refusal in the
Swedish courts on grounds, inter alia, of infringement of TFEU Article 34 on free
movement of goods, arguing that the effect of the Swedish scheme was to reserve
around 18 per cent of the Swedish electricity market (i.e. the portion subject to the
quota) to Swedish electricity producers. The CJEU had regard to the fact that the RES
Directive provides that member states may meet their binding renewables obligations by
applying “support schemes” (Article 3(3) of the RES Directive), defined to include any
instrument that promotes the use of renewable energy, including green certificate
schemes, and also provides that, “Without prejudice to [TFEU Articles 107 and 108],
Member States shall have the right to decide, in accordance with Articles 5 to 11 of this
Directive, to which extent they support energy from renewable sources which is

76
At paragraph 55.
77
At paragraph 61.
78
Case C-573/12 ECLI:EU:C:2014:2037.
79
Directive 2009/28/EC on the promotion of the use of energy from renewable sources OJ 2009 L
140/16.
80
Ibid, Article 3. See also, Article 7d(6) of the Fuel Quality Directive, Directive 2009/30/EC OJ 2009 L
140/88, which introduced the mandatory target of achieving by 2020 a 6 per cent reduction in the
greenhouse gas intensity of fuels used in road transport and non-road mobile machinery.
17

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produced in a different Member State.” Further, Article 15 of the RES Directive
requires member states to ensure that proof of the renewable source of energy in an
energy supplier’s energy mix must be proven by guarantees of origin, “in accordance
with objective, transparent, and non-discriminatory criteria.”

In its judgment, the CJEU noted first that, while the RES Directive clarified that
member states have the right to decide to what extent they support green energy
produced in another member state, it did not fully harmonize national support schemes
such as to exclude the application of TFEU Article 34.81 It further held that, while the
Swedish rules constituted a measure having equivalent effect to a quantitative
restriction, and, as such, was prima facie contrary to Article 34, promoting the use of
renewable energy sources for the production of electricity constituted a legitimate
objective which was in principle capable of justifying barriers to the free movement of
goods. Ultimately the judgment turned on the question of the proportionality of the
territorial restriction as such. The CJEU reasoned that the Swedish scheme at issue was
proportionate “as EU law currently stands”82 and that, despite the fact that the RES
Directive provided for guarantees of origin of renewable energy (Article 15), the
“systematic identification” of green electricity was still “difficult to put into practice” at
the distribution and consumption stages.83 Further, national support schemes for green
electricity had not yet been fully harmonized,84 with different member states having
different RES targets and different renewable energy potentials (and costs).

The CJEU went on to consider the proportionality of the Swedish legislation as a whole,
and specifically its use of a market mechanism to achieve Sweden’s environmental-and
-energy goals and held that in order to be proportionate, such a market must be proven
to function effectively and fairly, such that traders subject to renewables obligations can
in fact “obtain certificates effectively and under fair terms”.85 To this end, it was

important that mechanisms be established which ensure the creation of a genuine market
for certificates in which supply can match demand, reaching some kind of balance, so that
it is actually possible for the relevant suppliers and users to obtain certificates under fair
terms.

Further, the CJEU added, the method for determining the penalty for non-compliance
with the quota, and the amount of that penalty, must not go beyond what is necessary to
provide an incentive to comply, and must not be “excessive”.86 Vindkraft, therefore,
signals the CJEU’s conditional acceptance of member states’ use of market-based
mechanisms to achieve environmental aims, and in particular its willingness to review
whether the conditions for market actors are in fact “fair”. The CJEU’s approach to
penalties for non-compliance with national schemes (applying proportionality-based

81
Vindkraft, paragraphs 61-63.
82
Ibid, paragraph 105.
83
Ibid, paragraphs 90, 96.
84
Ibid, paragraph 94.
85
Ibid, para. 113.
86
Ibid, §116.
18

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principles) may be contrasted with its dismissal of the argument that penalties for non-
surrender under the ETS should be proportionate (as held in Billerud, discussed
above).87 The CJEU upheld the Swedish system whereby approval for the award of
green electricity certificates was reserved to green electricity production installations
located in Sweden.

Vindkraft concerned the compatibility of national green incentive measures with EU

internal market law; in Industrie du Bois,88 the CJEU was asked to consider the
compatibility of such measures with the EU law principle of equal treatment. In that
case, the applicant challenged the compatibility of the restrictions placed by the
Walloon region of Belgium on the grant of green certificates to co-generation plants
powered by wood (as opposed to, in particular, biomass other than wood), on the
ground that those restrictions breached the EU law principle of equal treatment and the
EU Charter of Fundamental Rights. The CJEU rejected this argument, holding that, in
the present state of EU law, member states were entitled, when introducing national
support schemes for cogeneration and renewable energy production, to provide for
enhanced support measures of particular benefit to cogeneration plants principally using
biomass with the exclusion of cogeneration plants principally using wood or wood
waste.89 As with its judgments on the ETS discussed above, therefore, the CJEU’s
approach is to acknowledge that transitional periods in the development of national
support schemes may be necessary, and an absolutist approach is inappropriate.

3.3. State-Aid Litigation

Under the EU’s state-aid rules, state aid granted by member states is in principle90
unlawful unless notified to the European Commission. The Commission therefore plays
a central role in EU state-aid policy, and the Guidelines on State Aid for Environmental
Protection and Energy, discussed above, provide member states with an indication of
what type and level of environmental state aid are compatible with the Treaty from the
Commission’s perspective. It is the CJEU, however, that alone can ultimately define the
concept of “aid” and therefore determine what does, and does not, constitute notifiable
“aid” under TFEU Article 107(1).

The influence of the PPP is evident in certain Commission and CJEU state-aid case law,
especially on the definition of the concept of state aid.91 As observed by Advocate-

87
See similarly, Case C-492/14 Essent Belgium ECLI:EU:C:2016:732.
88
Case C-195/12 ECLI:EU:C:2013:598.
89
Industrie du Bois, §§53 et infra.
90
Unless it is it is de minimis in nature, or falls within one of the Commission’s so-called “block
exemption” regulations, relieving the Member State from the duty to notify.
91
For instance, where an undertaking has polluted a particular site, a grant by the State to clean up the
pollution will, in compliance with the polluter pays principle, constitute aid unless the clean-up costs are
subsequently recovered from the polluter. See for example Commission Decision 1999/272/EC Kiener
Deponie Bachmanning OJ 1999 L 109/51 and Commission Decision N 856/97 Schmid Schraubenwerke,
OJ 1998 C 409/5 and see Suzanne Kingston, Greening EU Competition Law and Policy (Cambridge:
Cambridge University Press, 2012), Ch. 12.
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General Jacobs in GEMO,92 who was considering the role of the PPP in determining
whether pursuant to TFEU Article 107(1) “aid” exists,

the principle is used as an analytical tool to allocate responsibility according to economic

criteria for the costs entailed by the pollution in question. A given measure will constitute
State aid where it relieves those liable under the polluter-pays principle from their
primary responsibility to bear the costs.

He contrasted this with the significance of the polluter pays principle in determining
whether the “aid” should be considered by the Commission to be compatible with the
Treaty pursuant to TFEU Article 107(3), where it

is used by contrast in a prescriptive way as a policy criterion. It is relied on to argue that

the costs of environmental protection should as a matter of sound environmental and
State aid policy ultimately be borne by the polluters themselves rather than by States.93

In Vent de Colère,94 the CJEU considered whether French legislation obliging

electricity distributors to purchase wind energy at a higher price than the normal market
price constitutes state aid within the meaning of TFEU Article 107(1) (and therefore
should have been notified to the Commission prior to the grant), where the costs
ensuing from this purchase obligation are compensated by a public fund to which
electricity producers, suppliers, and distributors contribute, and are passed on to
consumers via a uniform and generally applicable charge.

The CJEU found that the the French mechanism constituted an “intervention through
State resources”, which was in that case the key question in evaluating whether the law
entailed state aid. In its reasoning, the CJEU distinguished the German feed-in tariff at
issue in PreussenElektra, which had been held not to entail state resources, on the
ground that the charge intended to offset the extra costs from the French purchase
obligation was collected from all final consumers of electricity in France and entrusted
to the French Caisse des dépôts et consignations, a public body.95 Further, the French
Minister for Energy determined the amount of that charge, and French law provided for
an administrative penalty for failure to pay the charge, with the French state ultimately
guaranteeing that any shortfall in sums collected, as compared to the additional costs of
the purchase obligation for electricity undertakings, would be made up by the state. As a
consequence of the CJEU’s judgment, the French wind-energy promotion scheme,
which had been in operation since 2000, constituted illegal aid, meaning that in
principle it should be repaid along with interest on the amounts due. The CJEU refused
to limit the temporal effects of the judgment following argument as to its serious
financial consequences for the economic actors at issue.96

92
Case C-126/01 ECLI:EU:C:2003:622, at paragraphs 68 - 70.
93
Ibid.
94
Case C-262/12 ECLI:EU:C:2013:851.
95
Ibid, paragraph 22.
96
Ibid, paragraph 44.
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Conversely, in Kernkraftwerke Lippe-Ems, the CJEU held that a German levy on
nuclear fuel used for the commercial production of electricity did not constitute state aid
within the meaning of TFEU Article 107(1).97 In assessing whether the levy constituted
aid, the critical question was whether it could be said to be “selective” in its application,
i.e. whether it favoured certain undertakings or the production of certain goods, and
therefore applied in a discriminatory manner. The CJEU held that the levy was not
selective, and so did not satisfy one of the four essential criteria in the definition of
“aid”.98 In so holding the CJEU rejected the applicant’s arguments that the effect of the
levy was to tax nuclear sources as not determinative, as the objective of the measure
was ultimately to raise “revenue intended, inter alia, to contribute, in the context of
fiscal consolidation and in accordance with the polluter-pays principle” to a reduction in
the burden borne by the German exchequer to fund the rehabilitation of the specific site
at issue where radioactive waste from the use of nuclear fuel is stored.99 Accordingly,
the CJEU held, non-nuclear methods of producing electricity could not be said, in the
light of the objective pursued by the German rules, to be in a factual and legal situation
that is comparable to that of the production method based on nuclear fuel, as only that
method generates radioactive waste arising from the use of such fuel. In reaching that
conclusion, the CJEU held that the German measure was compatible with the EU’s
2003 Directive on energy taxation, as the nuclear fuel at issue did not form part of the
limited number of products that the EU had exempted from energy tax.

Kernkraftwerke Lippe-Ems illustrates the importance of the PPP in EU state-aid law and
that the CJEU will apply the principle tailored to the specific measure at issue. The fact
that the pollution at issue might result in lower emissions will not in itself constitute a
reason for requiring equality of treatment with other polluters, unless there is a specific
climate rationale for the national measure at issue (which, in that case, there was not).

4. Conclusion: The Future of the PPP in Climate-Relevant Litigation

The role of judges in EU climate policy is already significant. That role is set to
increase. The Von der Leyen Commission has signalled, through the “European Green
Deal”, that climate policy is a top priority, and that it intends to codify the EU’s goal to
be carbon neutral by 2050 into an EU Climate Law, in order to “set out clearly the
conditions for an effective and fair transition, to provide predictability for investors, and
to ensure that the transition is irreversible”.100 The Commission intends that the new
Climate Law will ensure that “all EU policies contribute to the climate neutrality
objective and that all sectors play their part”.101

97
Case C-5/14 ECLI:EU:C:2015:354.
98
The other elements in the definition of aid requiring an intervention by the State or through State
resources which confers an advantage on the recipient and distorts or threatens to distort competition and
affects trade between Member States.
99
Ibid, paragraph 78.
100
See European Commission, “Roadmap on Climate Law”, announcing a legislative proposal by first
quarter 2020, Ares(2020)119545, available at https://ec.europa.eu/info/law/better-
regulation/initiatives/ares-2020-119545 (accessed 16 January 2020).
101
Ibid.
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The PPP forms an essential part of the constitutional framework for EU environmental
policy and, as soft law hardens into legislation and binding targets, judges will be
required to answer difficult questions about its implications. To date, the CJEU case law
has shown a rather deferential and pragmatic approach in its application to specific
cases (Arcelor), where the CJEU leaves a wide margin of appreciation to the EU
legislature, and verifies principally whether the legislature considered the appropriate
data and complied with transparency requirements in coming to its assessment of how
the polluter should be defined, and how much the polluter should pay (Billerud, Poland
v. Commission 2019). The CJEU has largely been supportive of the EU legislature’s
efforts to pass legislation aimed at tackling climate change, even when the legislative
solution arrived at is not perfect or entirely consistent (Arcelor, ATAA). As concerns
member states, the CJEU has shied away from deriving specific obligations for member
states directly from the PPP in the absence of any implementing EU legislation (Fipa,
UNESA), although it has shown significant latitude to member states where they have
themselves made the choice to pass legislation better implementing the PPP (Iberdrola,
Vindkraft, Industrie du Bois, Kernkraftwerke Lippe-Ems).

While the PPP has largely arisen in cases concerning economic instruments, its role in
rights-based or so-called “loss and damage” cases in the EU remains relatively
unexplored. In its December 2019 judgment in Urgenda,102 the most significant and
high-profile of such cases to date, the Dutch Supreme Court held that the Netherlands
had a positive obligation pursuant to Articles 2 and 8 of the European Convention on
Human Rights (ECHR) to reduce its emissions by at least 25 per cent by 2020
compared to 1990. While the Court did not rely expressly on the PPP, the influence of a
PPP-based approach is clear. In particular, the Supreme Court held that “under Articles
2 and 8 ECHR, the Netherlands is obliged to do ‘its part’ in order to prevent dangerous
climate change, even if it is a global problem”, reasoning that the UNFCCC is based on
the understanding that “all countries will have to do the necessary”, and on the principle
of “partial responsibility” in the case of unlawful acts that give rise to “only part of the
cause of the damage”.103 Accordingly, “partial fault” also justified “partial
responsibility”, in line with the UN’s Draft Articles on Responsibility of States for
Intentionally Wrongful Acts,104 and it is no defence, the Supreme Court held, to say that
other countries are not playing their part, especially as all reductions of greenhouse gas
emissions make a difference.105 In the Supreme Court’s judgment it followed that all
contracting states to the ECHR are obliged to “do ‘their part’ to counter” the danger
posed by climate change.106 In the case of the Netherlands, its “part” was indicated by
the “high degree of international consensus” on the need for a 25-40 per cent reduction
in emissions between 1990 and 2020 for Annex I countries. This included the
Netherlands individually, irrespective of the fact that the EU had also exercised

102
Urgenda Foundation v The State of the Netherlands ECLI:NL:HR:2019:2007.
103
Ibid, paragraphs 5.7.1 – 5.7.6.
104
Yearbook of the International Law Commission, 2001, vol. II, Part Two.
105
Urgenda, note 94 supra, paragraphs 5.7.6 – 5.7.7.
106
Ibid, paragraph 5.8.
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competence in the climate context.107 Ultimately, the Supreme Court held that the Court
of Appeal’s judgment should stand, directing the Netherlands to reduce its emissions by
the end of 2020 by at least 25 per cent compared to 1990.

Urgenda therefore represents a willingness to ensure that the polluter pays by means of
imposing a positive obligation on the Netherlands, irrespective of the difficult issues of
causation and collective responsibility that apply. This far-reaching application of the
principle of partial responsibility for climate change will undoubtedly be influential in
similar cases pending and to be brought in other European jurisdictions.108 Furthermore,
as a judgment based on the application of a common European legal instrument, the
ECHR, it cannot easily be distinguished by other national judges on the basis that it
merely represents an application of Dutch domestic law (as with the first instance
decision in the case, which applied Dutch tort law). The judgment therefore can be said
to have persuasive status in other ECHR states, and at the very least puts it up to other
national judges to justify and explain themselves if they reach a different conclusion.

Finally, the influence of the PPP will also likely be felt in nascent European climate
litigation aimed at corporations, seeking to make the largest carbon polluters pay. The
pending German case of Lliuya v. RWE AG109 is at present the most advanced such case,
where the applicant, a Peruvian farmer, has sued the German energy company RWE on
the basis that it is partially responsible for the melting of a mountain glacier near his
home. In that case, the applicant has claimed that RWE is 0.47 per cent responsible for
the damage at issue, in proportion to RWE’s share of worldwide greenhouse gas
emissions. He was unsuccessful before the District Court, which was not willing as a
matter of German law to attribute partial responsibility to a single emitter in a case of
cumulative causation. However, the claim has passed the first hurdle at the appeal stage,
and the appeal court has ordered the gathering of evidence, which is still ongoing.
While European cases against private corporations are still in their infancy,110 and
difficult questions of evidence and proof will undoubtedly arise, this will be the next
frontier of the PPP in European climate litigation.

107
Ibid, paragraph 7.3.3.
108
See for instance, the pending Irish litigation in Friends of the Irish Environment v Government of
Ireland, which was unsuccessful at first instance (see judgment at [2019] IEHC 747) but is currently on
appeal.
109
No. 2 O 285/15 Essen Regional Court; currently on appeal to the Higher Regional Court, Hamm.
110
For an overview of global trends in such litigation, see Geetanjali Ganguly, Joana Setzer and Veerle
Heyvaert, “If at First you Don’t Succeed: Suing Corporations for Climate Change” 38(4) Oxford Journal
of Legal Studies 841 (2018).
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