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Emission Allowances: Non-legal Terminology and Problems of Qualification

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Abstract

The essay analyses the issue of the legal qualification of greenhouse gases emission “allowances” as a clear example of the problems arising in the translation and interpretation of legal texts within the EU context.

In particular, the essay highlights that sometimes the EU legislator introduces new concepts specific to EU law, while it applies ambiguous terms and avoids providing definitions, often as a result of the difficulties in reaching a political agreement on terms that convey concepts linked to the different legal cultures of the different Member States. In front of these difficulties in reaching an agreement on common definitions and shared concepts, the EU lawmakers tend to prefer a non-legal terminology. As these apparently neutral terms contain no useful legal content, lawyers end up facing very difficult issues of interpretation.

The absence of common terms and general legal concepts at an EU level, at least in specific areas, can lead to significantly different outcomes in the legal practices of Member States and consequently has a relevant impact on the process of harmonisation. These issues are clearly exemplified by the problem of the legal qualification of greenhouse gases emission allowances. In fact, failing a legal definition of emission allowances in EU legislation, the legal nature of allowances and their regulation are necessarily contingent on the relevant legal system, with the consequent and inevitable differences between Member States.

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Notes

  1. 1.

    European legal scholars have been dealing with the issue of European legal multilingualism and the related problems of legal translation for quite some time, and the literature on this topic is now quite extensive. On this issue, see in particular: Šarčevič (2001), Wagner et al. (2002), Gambaro (2004), Creech (2005), Rossi (2005), Pozzo and Jacometti (2006), Ioriatti Ferreri (2007), European Commission (2010).

  2. 2.

    For an analysis of the EU emissions trading system, we would refer to Jacometti (2010), pp. 171 ff., and, inter alia, to Delbeke (2006), Faure and Peeters (2008).

  3. 3.

    Generally, in a system of tradable pollution rights the amount of emissions is set by the public authorities that issue a certain number of allowances on the basis of the maximum level of pollution permitted in a given area. Such allowances, which grant the right to emit a certain amount of a pollutant over a certain period of time, are sold or “grandfathered” to polluters, who can then decide whether to use the allowances or to sell them to third parties. Indeed, there are no limits to the emissions of individual plants: to comply with the law, all they need is to have a number of allowances corresponding to their emission levels. Polluters who manage to keep their emissions below the level permitted by their allowances may sell excess allowances to other polluters; polluters that do not consider it economically viable to reduce emissions may buy allowances on the market. Such a system should provide incentives for pollution reduction and make emissions cuts to occur where their costs is lower, thus minimising the individual and collective costs for de-pollution. On tradable pollution rights, we would refer again to Jacometti (2010), pp. 3 ff.

  4. 4.

    See Yandle (1999).

  5. 5.

    As regards multilingual interpretation of EU law, see, among others, Schübel-Pfister (2004), Gambaro A (2007), Pozzo (2008), Darlén (2009).

  6. 6.

    As to this, it should be recalled that German law distinguishes between “mittelbarer” and “unmittelbarer Besitzer”, whereas Austrian law distinguishes instead between “Besitzer” and “Inhaber”. See, in Italian, Pozzo (1992).

  7. 7.

    Title 42, Chapter 85, U.S. Code. The Clean Air Act Amendments of 1990 introduced an emissions trading system for sulphur dioxide (SO2), which is the main cause of acid rain. For an analysis of the US system, we would refer again to Jacometti (2010), pp. 58 ff.

  8. 8.

    Dennis (1993). The 5th Amendment of the U.S. Constitution provides that private property shall not be “taken for public use, without just compensation” (so-called taking clause). According to US case law, the taking clause requires that the government compensate an owner after taking its property when it constitutes an “uncompensated” taking (e.g. when the property is taken for public use and not for reasons of preventing harm or loss). However, it should be noted that some legal scholars maintain that the constitutional protection that provides for the award of just compensation in the case of taking is not precluded by the fact that allowances do not constitute property rights in the strict sense (Rehbinder and Sprenger 1985, p. 67; Tether 1985). This doctrine has its foundation in the case law relating to compensation for administrative acts that affect private interests. According to this case law, the State’s interest in effective regulation must be balanced with the importance of the impact on private interests (for the reference case law, see Kaiser Aetna v. US, 44 US164, 175 (1979); Penn Central v. New York, 438 US104 (1978); Wickard v. Filburn, 317 US111, 131 (1942). See also Boucquey 1999, pp. 38 ff.).

  9. 9.

    See Cole (1999), Lucchini Guastalla (2005), Gambaro FL (2007).

  10. 10.

    See Esposito De Falco (2005), pp. 70 ff.; Gambaro (2005); Lucchini Guastalla (2005); Tosello (2005); Cicigoi and Fabbri (2007), pp. 59 ff.; Clarich (2007); Lipari (2007). For an analysis of the problem of the legal nature of allowances in the Italian legal system, we would refer again to Jacometti (2010), pp. 422 ff.

  11. 11.

    European Commission (2010), p. 130.

  12. 12.

    Cf. Hobley and Rowe (2004). For an analysis of the different concept of property in the Anglo-American common law, see Gambaro (1992), and more specifically with regard to property rights in English law, see Ball (2006).

  13. 13.

    Celtic Extraction Ltd and Bluestone Chemicals v Environment Agency, [2001] Ch. 475.

  14. 14.

    In the case, the Court of Appeal was called upon to decide whether or not a waste management licence constituted a property (for the purposes of s. 436 of the Insolvency Act 1986) and developed three tests that needed to be satisfied in order to consider such licence as property: (i) there must be a statutory framework conferring an entitlement on one who satisfies certain conditions, (ii) the permit must be transferable, (iii) the licence must have value. If these tests are applied to emission allowances as defined in EU law, it is highly likely that they will be treated as property rights in the UK. See Anttonen et al. (2007).

  15. 15.

    Chose in action, regulated investment, bond, bill of exchange, negotiable instrument, documentary intangible, etc.

  16. 16.

    In particular, the qualification of allowances as property rights affects a fundamental question, namely, the faculty of public authorities to “withdraw” allowances in circulation. As also pointed out by DEFRA, the qualification of allowances as property rights would imply that they would be eligible for protection pursuant to the European Convention on Human Rights (ECHR) and the Human Rights Act 1998. According to some legal scholars and according to the approach followed by DEFRA itself, this would disallow the power of the State to withdraw allowances in circulation, except as pursuant to Article 1 of Protocol 1 to the Convention (see Hobley and Rowe 2004). On the other hand, both the European Court of Human Rights and national courts distinguish clearly between the deprivation of property and the control of the use of property (see ECHR, 25 October 1989, Jacobsson c. Svezia, n. 10842/84). Some scholars therefore conclude that the rules implementing the Emissions Trading Directive—including measures such as the freezing of allowances accounts—should be considered a form of control over the use of property in accordance with the public interest and should not be viewed as constituting a violation of allowance holders’ property rights (see Anttonen et al. 2007).

  17. 17.

    Holzborn and Israel (2005), contra Ehricke and Köhn (2004).

  18. 18.

    On this issue, see also below.

  19. 19.

    See, among others, Marr and Schafhausen (2004); Holzborn and Israel (2005); Sommer (2006), who affirms that allowances are public in nature; Ehricke and Köhn (2004); Burgi (2004), who argues that allowances have a private character; Wagner (2003), who highlights the hybrid nature of allowances that cannot be classified exclusively with reference either to public law or to private law. In this regard, we cannot ignore that the categorisation of allowances as the object of a property right under the German Civil Code (Bürgerliches Gesetzbuch, BGB) seems to be problematic. In respect of private law, §§ 90 and 903 of the BGB specify that only corporeal things can be the subject matter of property, which excludes intangible entities (for an analysis of this issue, see Pozzo (1992), pp. 316 ff.). However, the concept of property in the BGB does not coincide with the concept of Article 14 of the German Constitution (Grundgesetz, GG), since German courts have recognised a broader concept than that used in the Civil Code. On the strength of the broader definition in the Constitution, most legal scholars seem to concur, albeit through different arguments, that the protection afforded by Article 14 GG to property will extend also to emission allowances. In fact, if this protection is implicit in cases where allowances are classified as belonging to the sphere of private law, it should also apply where they are classified as belonging to the sphere of public law, as it is commonly accepted that Article 14 GG should also be applied to protect the rights of public nature when they can be assimilated to the legal position of the owner, as in this case (for an analysis of this issue, see Burgi 2004; Winkler 2005, pp. 321 ff.).

  20. 20.

    This decision was welcomed by private law scholars (see Chaumeil and Smith 2003; Le Bars 2004; Revet 2005; Peylet 2005) but was much criticised by those legal scholars who view allowances as being administrative authorisations and challenge the recognition of property rights on allowances (see Giulj 2004; Jegouzo 2004; Mistral 2004; Moliner-Dubost 2004; Rousseaux 2006; Thieffry 2007, who, however, does not take a position in the controversy but merely notes the existing differences). For a more in-depth analysis of the legal nature of allowances in the French legal system, we would refer again to Jacometti (2010), pp. 362 ff.

  21. 21.

    See par. 2 above. See also Peylet (2005) and Pâques and Charneux (2004), specifically referring to Belgian law.

Abbreviations

BGB:

Bürgerliches Gesetzbuch

DEFRA:

Department for Environment Food and Rural Affairs

ECHR:

European Convention on Human Rights

Emissions Trading Directive:

Directive 2003/87/EC

EU:

European Union

GG:

Grundgesetz

MiFID:

Directive 2004/39/EC on markets in financial instruments

TEHG:

Treibhausgas-Emissionshandelsgesetz

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  1. University of Insubria, Via Sant’Abbondio, n. 12, 22100, Como, Italy

    Valentina Jacometti

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  1. Dept. of Law, Economics and Culture, University of Insubria, Como, Italy

    Francesca Ruggieri

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Jacometti, V. (2014). Emission Allowances: Non-legal Terminology and Problems of Qualification. In: Ruggieri, F. (eds) Criminal Proceedings, Languages and the European Union. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-37152-3_11

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