EU state aid law and national climate regulation

Abstract

This contribution discusses the EU state aid framework in view of national regulatory climate protection measures in order to assess the possibility for member states to introduce domestic measures. In view of the Effort Sharing Decision, member states have to consider which national approaches should be developed in order to address the greenhouse gas emissions of sources outside the EU Emissions Trading System (EU ETS). In doing so, member states need to respect EU state aid law. The focus in this chapter will be on the question whether two specific regulatory instruments, these being a national credit and trade emissions trading scheme and a cost equalization scheme for non EU ETS installations, will be possible given EU state aid law. For each model a concrete practical example will be discussed. For the credit and trade emissions trading approach this is a scheme for NOx (nitrogen oxide) emissions that has already been applied in the Netherlands. This model could be considered for regulating greenhouse gas emissions from non EU ETS sources as well. The other example is a cost equalization scheme proposed for agricultural greenhouse gas emissions in the Netherlands. Both systems will be reviewed from the perspective of EU state aid law. State aid legislation constitutes a basic pillar of EU competition policy. State intervention undermines the operation of markets by putting certain undertakings at a comparative advantage over other undertakings and thereby causes damage to competitors throughout the internal market.