25 November 2021 (*1)

(Reference for a preliminary ruling – Scheme for greenhouse gas emission allowance trading – Scheme for the free allocation of allowances – Decision 2011/278/EU – Article 3(d) – Fuel benchmark sub-installation – Concepts of ‘combustion’ and ‘fuel’ – Primary copper production by flash smelting – Request for allocation – Allowances requested and not yet allocated on the date of expiry of a trading period – Possibility of issuing such allowances during the subsequent trading period by way of enforcement of a judicial decision given after that date)

In Case C‑271/20,

REQUEST for a preliminary ruling under Article 267 TFEU from the Verwaltungsgericht Berlin (Administrative Court, Berlin, Germany), made by decision of 11 June 2020, received at the Court on 19 June 2020, in the proceedings

Bundesrepublik Deutschland,

THE COURT (Fifth Chamber),

composed of E. Regan, President of the Chamber, K. Lenaerts, President of the Court, acting as Judge of the Fifth Chamber, C. Lycourgos (Rapporteur), President of the Fourth Chamber, I. Jarukaitis and M. Ilešič, Judges,

Advocate General: G. Hogan,

Registrar: M. Krausenböck, Administrator,

having regard to the written procedure and further to the hearing on 19 May 2021,

after considering the observations submitted on behalf of:

–Aurubis AG, by S. Altenschmidt and D. Helling, Rechtsanwälte,

–Bundesrepublik Deutschland, by J. Steegmann and A. Leskovar, acting as Agents,

–the European Commission, by B. De Meester, C. Hermes and G. Wils, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 24 June 2021,

gives the following

1This request for a preliminary ruling concerns the interpretation, first, of Article 3(d) of Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council (OJ 2011 L 130, p. 1) and, second, of the temporal scope of that decision in respect of the third trading period (2013 to 2020).

2The request has been made in proceedings between Aurubis AG and the Bundesrepublik Deutschland (Federal Republic of Germany), represented by the Umweltbundesamt, Deutsche Emissionshandelsstelle (Federal Environment Agency, German Emissions Trading Authority, ‘the DEHSt’), relating to greenhouse gas emission allowances (‘the emission allowances’) to be allocated to Aurubis for free in respect of its primary copper production activity.

Legal context

EU law

Directive 2003/87

3Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32), in the version applicable when Decision 2011/278 was adopted and which is relevant for the purpose of examining the first question, includes the amendments made by Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87 so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community (OJ 2009 L 140, p. 63) (‘Directive 2003/87’).

4Directive 2003/87 was subsequently amended again on numerous occasions, including by Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October 2015 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and amending Directive 2003/87 (OJ 2015 L 264, p. 1) and by Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 2003/87 to enhance cost-effective emission reductions and low-carbon investments, and Decision 2015/1814 (OJ 2018 L 76, p. 3). Article 10(1), Article 10a(5) and (7), and Article 13 of Directive 2003/87, in the version as amended by Directive 2018/410, are relevant for the purpose of examining the second question. The wording of the other provisions of Directive 2003/87, as cited below, was already in force when Decision 2011/278 was adopted and is still in force today.

5Article 1 of Directive 2003/87, headed ‘Subject matter’, provides, in the first paragraph:

‘This Directive establishes a scheme for greenhouse gas emission allowance trading … in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’

6Article 2 of that directive, headed ‘Scope’, provides, in paragraph 1:

‘This Directive shall apply to emissions from the activities listed in Annex I and greenhouse gases listed in Annex II.’

7Article 3 of that directive, headed ‘Definitions’, states:

‘For the purposes of this Directive the following definitions shall apply:

…

(t) “combustion” means any oxidation of fuels, regardless of the way in which the heat, electrical or mechanical energy produced by this process is used, and any other directly associated activities, including waste gas scrubbing;

…’

8Article 10 of that directive, headed ‘Auctioning of allowances’, provides, in paragraph 1, in the version as amended by Directive 2018/410:

‘From 2019 onwards, Member States shall auction all allowances that are not allocated free of charge in accordance with Articles 10a and 10c of this Directive and that are not placed in the market stability reserve established by Decision [2015/1814] or cancelled …

…’

9Article 10a of Directive 2003/87, headed ‘Transitional Union-wide rules for harmonised free allocation’, provides, in paragraph 1:

‘…

The [harmonised measures adopted by the European Commission for free allocation of allowances] shall, to the extent feasible, determine Union-wide ex-ante benchmarks so as to ensure that allocation takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of the most efficient techniques …

…’

10Further, Article 10a(5) and (7), in the version as amended by Directive 2018/410, provides:

‘5. In order to respect the auctioning share set out in Article 10, for every year in which the sum of free allocations does not reach the maximum amount that respects the auctioning share, the remaining allowances up to that amount shall be used to prevent or limit reduction of free allocations to respect the auctioning share in later years. Where, nonetheless, the maximum amount is reached, free allocations shall be adjusted accordingly. …

…’

From 2021, allowances that pursuant to paragraphs 19 and 20 are not allocated to installations shall be added to the amount of allowances set aside in accordance with the first sentence of the first subparagraph of this paragraph.

11Article 13 of Directive 2003/87, headed ‘Validity of allowances’, provides, in the version as amended by Directive 2018/410:

‘Allowances issued from 1 January 2013 onwards shall be valid indefinitely. Allowances issued from 1 January 2021 onwards shall include an indication showing in which ten-year period beginning from 1 January 2021 they were issued, and be valid for emissions from the first year of that period onwards.’

12Article 19 of Directive 2003/87, which is headed ‘Registries’, provides, in paragraph 1:

‘Allowances issued from 1 January 2012 onwards shall be held in the [Union] registry for the execution of processes pertaining to the maintenance of the holding accounts opened in the Member State and the allocation, surrender and cancellation of allowances …’

13Article 20 of that directive, headed ‘Central Administrator’, provides, in paragraph 1:

‘The Commission shall designate a Central Administrator to maintain an independent transaction log recording the issue, transfer and cancellation of allowances.’

14Annex I to that directive contains a table listing the categories of activities to which the directive applies. They include the ‘production or processing of non-ferrous metals, including production of alloys, refining, foundry casting, etc., where combustion units with a total rated thermal input (including fuels used as reducing agents) exceeding 20 [megawatts (MW)] are operated’.

15Annex II to that directive lists the greenhouse gases covered. It includes, inter alia, carbon dioxide (CO₂).

Directive 2009/29

16According to recital 37 of Directive 2009/29:

‘In order to clarify the coverage of all kinds of boilers, burners, turbines, heaters, furnaces, incinerators, calciners, kilns, ovens, dryers, engines, fuel cells, chemical looping combustion units, flares, and thermal or catalytic post-combustion units by Directive [2003/87], a definition of “combustion” should be added.’

Recitals 1, 12 and 18 of Decision 2011/278 stated:

‘(1) Article 10a of [Directive 2003/87] requires that the [Union-wide] and fully harmonised implementing measures for the allocation of free emission allowances should, to the extent feasible, determine ex-ante benchmarks so as to ensure that the free allocation of emission allowances takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass and capture and storage of carbon dioxide, where such facilities are available, and should not provide incentives to increase emissions. Allocations must be fixed prior to the trading period so as to enable the market to function properly.

…

(12) Where deriving a product benchmark was not feasible, but greenhouse gases eligible for the free allocation of emission allowances occur, those allowances should be allocated on the basis of generic fallback approaches. A hierarchy of three fallback approaches has been developed in order to maximise greenhouse gas emission reductions and energy savings for at least parts of the production processes concerned. The heat benchmark is applicable for heat consumption processes where a measurable heat carrier is used. The fuel benchmark is applicable where non-measurable heat is consumed. … For process emissions, emission allowances should be allocated on the basis of historical emissions. …

…

(18) In order to avoid any distortion of competition and to ensure an orderly functioning of the carbon market, Member States should ensure that when determining the allocation of individual installations no double counting and no double allocation takes place. In this context, Member States should pay particular attention to cases where a benchmarked product is produced in more than one installation, where more than one benchmarked product is produced in the same installation or where intermediate products are exchanged across installation boundaries.’

17Article 3 of that decision, headed ‘Definitions’, stated:

‘For the purposes of this Decision, the following definitions shall apply:

…

(b) “product benchmark sub-installation” means inputs, outputs and corresponding emissions relating to the production of a product for which a benchmark has been set in Annex I;

(c) “heat benchmark sub-installation” means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production, the import from an installation or other entity covered by the Union scheme, or both, of measurable heat which is:

consumed within the installation’s boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, or

exported to an installation or other entity not covered by the Union scheme with the exception of the export for the production of electricity;

(d) “fuel benchmark sub-installation” means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production of non-measurable heat by fuel combustion consumed for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, including safety flaring;

(e) “measurable heat” means a net heat flow transported through identifiable pipelines or ducts using a heat transfer medium, such as, in particular, steam, hot air, water, oil, liquid metals and salts, for which a heat meter is or could be installed;

…

(g) “non-measurable heat” means all heat other than measurable heat;

(h) “process emissions sub-installation” means greenhouse gas emissions listed in Annex I to Directive [2003/87] other than [CO₂], which occur outside the system boundaries of a product benchmark listed in Annex I, or [CO₂] emissions, which occur outside the system boundaries of a product benchmark listed in Annex I, as a result of any of the following activities and emissions stemming from the combustion of incompletely oxidised carbon produced as a result of the following activities for the purpose of the production of measurable heat, non-measurable heat or electricity provided that emissions that would have occurred from the combustion of an amount of natural gas, equivalent to the technically usable energy content of the combusted incompletely oxidised carbon, are subtracted:

the chemical or electrolytic reduction of metal compounds in ores, concentrates and secondary materials;

the removal of impurities from metals and metal compounds;

the decomposition of carbonates, excluding those for flue gas scrubbing;

chemical syntheses where the carbon bearing material participates in the reaction, for a primary purpose other than the generation of heat;

(v)the use of carbon containing additives or raw materials for a primary purpose other than the generation of heat;

(vi)the chemical or electrolytic reduction of metalloid oxides or non-metal oxides such as silicon oxides and phosphates;

Article 6 of that decision, headed ‘Division into sub-installations’, provided:

(a)a product benchmark sub-installation;

(b)a heat benchmark sub-installation;

(c)a fuel benchmark sub-installation;

(d)a process emissions sub-installation.

Sub-installations shall correspond, to the extent possible, to physical parts of the installation.

The sum of the inputs, outputs and emissions of each sub-installation shall not exceed the inputs, outputs and total emissions of the installation.

Decision 2011/278 was repealed with effect from 1 January 2021 by Commission Delegated Regulation (EU) 2019/331 of 19 December 2018 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87 (OJ 2019 L 59, p. 8).

However, according to Article 27 of that delegated regulation, that decision is to continue to apply to allocations relating to the period prior to 1 January 2021.

Regulation (EU) No 389/2013.

Article 4 of Commission Regulation (EU) No 389/2013 of 2 May 2013 establishing a Union Registry pursuant to Directive 2003/87, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations (EU) No 920/2010 and No 1193/2011 (OJ 2013 L 122, p. 1), headed ‘Union Registry’, provided:

Under Article 6 of that regulation, headed ‘European Union transaction log’:

Article 16 of that regulation, headed ‘Opening operator holding accounts in the Union Registry’, provided:

Article 41 of the same regulation, headed ‘Creation of allowances’, stated, in paragraph 1:

‘The central administrator may create an EU Total Quantity Account, an EU Aviation Total Quantity Account, an EU Auction Account, an EU Aviation Auction Account, an EU Credit Exchange Account and an EU International Credit Account as appropriate, and shall create or cancel accounts and allowances as made necessary by acts of Union law …’

Article 43 of Regulation No 389/2013, headed ‘Transfer of general allowances to be allocated free of charge’, provided:

‘The central administrator shall, in a timely manner, transfer general allowances from the EU Total Quantity Account into the EU Allocation Account in a quantity corresponding to the sum of the allowances allocated free of charge according to the national allocation tables of each Member State.’

Under Article 51 of that regulation, headed ‘Entry of national allocation tables into the EUTL’:

Article 52 of that regulation, headed ‘Changes to the national allocation tables’, stated:

(a)an installation’s permit has been revoked or has otherwise expired;

(b)an installation ceased operations;

(c)an installation was split into two or more installations;

(d)two or more installations were merged into one installation.

A Member State shall notify the Commission of changes to its national allocation table, concerning:

(a)allocations to new entrants or allocations to new entrants following significant capacity extensions;

(b)partial cessations of operations and significant capacity reductions;

(c)allocation free of charge pursuant to Article 10c of Directive [2003/87] that is justified in the light of advancement of the investments that have been undertaken and reported to the Commission pursuant to Article 10c(1) of that Directive;

(d)any other change not referred to in paragraph 1.

On receiving a notification pursuant to the first subparagraph, the Commission shall instruct the central administrator to make the corresponding changes to the national allocation table held in the EUTL if it considers that the changes to the national allocation table are in conformity with Directive [2003/87], Decision [2011/278] and decisions adopted by the Commission in accordance with Article 10c(6) of Directive [2003/87]. It shall otherwise reject the changes within a reasonable period and inform the Member State concerned without delay, stating its reasons and setting out criteria to be fulfilled for a subsequent notification to be accepted.’

Article 53 of that regulation, headed ‘Free allocation of general allowances’, provided:

…’

Regulation No 389/2013 was repealed, with effect from 1 January 2021, by Commission Delegated Regulation (EU) 2019/1122 of 12 March 2019 supplementing Directive 2003/87 as regards the functioning of the Union Registry (OJ 2019 L 177, p. 3).

However, under the second paragraph of Article 88 of that delegated regulation, Regulation No 389/2013 is to continue to apply until 1 January 2026 to all operations required in relation to the third trading period (2013 to 2020).

Decision 2015/1814

Under recital 7 of Decision 2015/1814:

‘… Accordingly, in order to avoid an imbalanced market situation of supply of allowances at the end of one trading period and the beginning of the next with possibly disruptive effects for the market, provision should be made for the auctioning of part of any large increase of supply at the end of one trading period in the first two years of the next period. In order to further enhance the stability of the European carbon market and to avoid artificially increasing supply towards the end of the trading period which started in 2013, allowances not allocated to installations pursuant to Article 10a(7) of Directive [2003/87] and allowances not allocated to installations because of the application of Article 10a(19) and (20) of that Directive (“unallocated allowances”), should be placed in the reserve in 2020. …’

Article 1 of that decision, headed ‘Market stability reserve’, provides:

…

…’

German law

Paragraph 9(1) of the Treibhausgas-Emissionshandelsgesetz (Law on greenhouse gas emissions trading) of 21 July 2011 (BGBl. 2011 I, p. 1475), in the version applicable to the dispute in the main proceedings, provides:

‘Installation operators shall receive an allocation of free allowances in accordance with the principles laid down in Article 10a … of Directive [2003/87] … in the version in force at the relevant time and in … Decision [2011/278].’

Paragraph 2 of the Verordnung über die Zuteilung von Treibhausgas-Emissionsberechtigungen in der Handelsperiode 2013 bis 2020 (Regulation on the allocation of greenhouse gas emission allowances in the 2013 to 2020 trading period) of 26 September 2011 (BGBl. 2011 I, p. 1921), in the version applicable to the dispute in the main proceedings (‘the ZuV 2020’), defines, in subparagraphs 27 and 29 thereof, the concepts ‘fuel benchmark sub-installation’ and ‘process emissions benchmark sub-installation’ in terms similar to those of Article 3(d) and (h) of Decision 2011/278.

The dispute in the main proceedings and the questions referred for a preliminary ruling

Aurubis operates an installation in Hamburg (Germany) which produces primary copper. Since that activity falls within the category of activities referred to in Annex I to Directive 2003/87 and described as the ‘production or processing of non-ferrous metals … where combustion units with a total rated thermal input … exceeding 20 MW are operated’, Aurubis is obliged to participate in the greenhouse gas emission trading scheme (‘the ETS’).

The installation concerned comprises two sub-installations, Rohhüttenwerk Nord and Rohhüttenwerk Ost. The dispute in the main proceedings relates to the activity of only the latter.

Rohhüttenwerk Ost is a foundry in which primary copper is obtained by flash smelting copper concentrate using the ‘Outokumpu’ process.

The copper concentrate used in that foundry is mainly composed of copper, sulphur and iron. It also contains traces of carbon and other substances. In order to obtain primary copper, that copper concentrate is first mixed with sand and other fine material. The preparation thus obtained is placed in the flash smelting furnace with a mixture of air and oxygen. Because of the chemical reaction between oxygen and, in particular, sulphurous substances contained in the copper concentrate, the temperature in the furnace exceeds 1200 °C, which in turn leads to the liquidation of the copper concentrate. The substances thus obtained are matte (which is a mixture of copper sulphide and iron sulphide), iron silicate and sulphur dioxide (SO2). Subsequently, the matte is inserted into a converter, into which the remaining fractions of sulphur and iron are oxidised. Heat is also produced at this point. The product of that stage is placed in an anode furnace, in which the remaining fractions of sulphur are transformed into SO2. This is how the final product, primary copper, is ultimately obtained.

Rohhüttenwerk Ost emits CO2 into the atmosphere due to the presence of carbon, which constitutes approximately 0.7% of the copper concentrate used. The foundry emits approximately 29000 tonnes of CO2 per year.

In response to a request made by Aurubis on 20 January 2012 for the allocation of allowances for that foundry, the DEHSt, by decision of 17 February 2014, allocated 2596999 free emission units to Aurubis for the third trading period (2013 to 2020).

By decision of 3 April 2018, in response to an objection by Aurubis, the DEHSt revoked in part its decision of 17 February 2014, in so far as it had allocated a quantity of allowances in excess of 1784398 units. The DEHSt gave as its reason the fact that primary copper production from copper concentrate could not be taken into account in the context of a ‘fuel benchmark sub-installation’, but had to be attached to a ‘process emissions sub-installation’.

On 30 April 2018, Aurubis brought an action against that decision of 3 April 2018 before the referring court. It claims that the free allocation of emission allowances should have been based on Paragraph 2(27) of the ZuV 2020 and Article 3(d) of Decision 2011/278. Primary copper production by flash smelting does not fall within any of the activities referred to in Paragraph 2(29) of the ZuV 2020 or in Article 3(h) of Decision 2011/278.

According to the DEHSt, in order for a sub-installation to constitute a ‘fuel benchmark sub-installation’, the primary purpose of the use of a material must be the production of heat. Copper concentrate is a raw material, and the primary purpose of its use is primary copper production. Furthermore, complete combustion of that concentrate does not occur, contrary to what is required in order for the fuel benchmark to apply. Moreover, ‘fuels’, within the meaning of Article 3(d) of Decision 2011/278, are fuels which can be replaced with other fuels, in particular natural gas. It is not possible to replace the copper concentrate in that way.

45The DEHSt also observes that the coverage of Aurubis’s requirements for emission allowances is, at approximately 130%, already excessive and that, if the number of allowances to be allocated to Aurubis were to be calculated on the basis of the fuel benchmark, that undertaking would obtain coverage of approximately 220% of its requirements and could thus sell a substantial portion of the allowances allocated.

46The referring court notes that, if it were to be concluded that Rohhüttenwerk Ost is a ‘fuel benchmark sub-installation’, that would amount to classifying the copper concentrate or, at the very least, the sulphur that it contains, as a ‘fuel’.

47That court notes that the Court held, in paragraph 53 of the judgment of 20 June 2019, ExxonMobil Production Deutschland, that Article 3(t) of Directive 2003/87 does not reduce the concept of ‘combustion’ solely to oxidation reactions which generate a greenhouse gas themselves. That interpretation by the Court is not, however, necessarily decisive for the purpose of interpreting the scope of the concept of ‘fuel’ within the meaning of Article 3(d) of Decision 2011/278.

48In the light of the reasons given in the allocation decision adopted by the DEHSt, it is necessary to determine whether an allocation on the basis of the fuel benchmark requires, as that authority maintains, the primary purpose of the combustion to be the production of heat, given that, in the present case, the copper concentrate used is both a raw material and a fuel. It is also necessary to clarify whether Article 3(d) of Decision 2011/278 refers only, as the DEHSt also claims, to the combustion of fuels which are interchangeable with other fuels.

49Additionally, the referring court is uncertain what the consequences are of the fact that the third trading period expired on 31 December 2020. It states that, according to German case-law, the end of the first and second trading periods meant that entitlements to an allowance that had not yet been allocated on 30 April following the expiry of the trading period concerned lapsed, since there was no express transitional provision in German law. There is also no transitional provision in German law in respect of the third trading period.

50None of the relevant EU acts contains a provision concerning compensation for entitlements across several periods. Moreover, no specific reserve of allowances was set aside in anticipation of court decisions. That said, there may be an indication in favour of the argument that the transition from the third to the fourth period does not cause entitlements to the allocation of allowances not yet made to lapse on 31 December 2020 in the form of Decision 2015/1814, which requires certain allowances not allocated by 31 December 2020 to be placed in a reserve.

51In those circumstances, the Verwaltungsgericht Berlin (Administrative Court, Berlin, Germany) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

(1)Are the requirements of Article 3(d) of [Decision 2011/278] for a free allocation of emission allowances on the basis of a fuel benchmark sub-installation fulfilled where, in an installation for the production of non-ferrous metals in accordance with Annex I to Directive [2003/87], a sulphur-containing copper concentrate is used in a flash smelting furnace to produce primary copper and the non-measurable heat required to melt the copper ore contained in the concentrate is produced essentially through oxidation of the sulphur contained in the concentrate, meaning that the copper concentrate is used both as a source of raw material and as a combustible material to generate heat?

(2)If the answer to Question 1 is in the affirmative:

Can entitlements to a further free allocation of emission allowances for the third trading period be met after the end of the third trading period with entitlements for the fourth trading period where the existence of the allowance entitlement is established by a court only after expiry of the third trading period, or do allowance entitlements that have not yet been met lapse on expiry of the third trading period?

Consideration of the questions referred

The first question

52By its first question, the referring court asks, in essence, whether Article 3(d) of Decision 2011/278 must be interpreted as meaning that the concept of a ‘fuel benchmark sub-installation’ covers, within an installation producing primary copper and whose activity falls within Annex I to Directive 2003/87, a flash smelting foundry that causes sulphur present in the raw material used to be oxidised, that raw material being a copper concentrate.

53It should be noted that Decision 2011/278 establishes harmonised rules for the allocation of free emission allowances and was adopted by the Commission under Article 10a of Directive 2003/87. With regard to installations in certain sectors of activity, that article provides for the allocation of such emission allowances, the quantity of which is to decrease gradually over the third trading period (2013 to 2020), with a view to reaching the complete abolition of free allowances in 2027 (see, to that effect, judgment of 3 December 2020, Ingredion Germany, C‑320/19, EU:C:2020:983, paragraphs 41 and 43).

54In the present case, it is not disputed that the primary copper production installation operated by Aurubis comes under that transitional scheme for the free allocation of emission allowances.

55As regards the third trading period, which is the only period at issue in the main proceedings, it was for the DEHSt, for the purposes of determining the number of free emission allowances to be allocated to Aurubis, to divide, in accordance with Article 6 of Decision 2011/278, that installation into one or more ‘sub-installations’ corresponding, as far as possible, to the physical parts of that installation.

56To that end, that decision provided for four categories of sub-installation, listed in Article 6 and defined in Article 3(b), (c), (d) and (h) of that decision. Those categories of sub-installation – namely ‘product benchmark sub-installations’, ‘heat benchmark sub-installations’, ‘fuel benchmark sub-installations’ and ‘process emissions sub-installations’ respectively – were mutually exclusive, in the sense that one single activity could fall within only one of those categories (see, to that effect, judgment of 8 September 2016, Borealis and Others, C‑180/15, EU:C:2016:647, paragraphs 62 and 69).

57Furthermore, in accordance with recital 12 of Decision 2011/278, the list of ‘heat benchmark’, ‘fuel benchmark’ and ‘process emissions’ sub-installation categories, known as ‘fallback approaches’ – which are applicable in cases where it had not been possible to calculate a ‘product benchmark’, but where greenhouse gas emissions eligible for the free allocation of emission allowances occur – are hierarchical in nature (see, to that effect, judgment of 8 September 2016, Borealis and Others, C‑180/15, EU:C:2016:647, paragraphs 62 and 69).

paragraphs 67 and 68). The category of ‘process emissions sub-installations’ was only the final fallback option (judgment of 18 January 2018, INEOS, C‑58/17, EU:C:2018:19, paragraph 36).

58It was therefore for the DEHSt, before classifying a sub-installation as a ‘process emissions sub-installation’, first to ascertain whether there was a ‘product benchmark’ for that sub-installation and, if that was not the case, to examine whether the relevant industrial production equipment of the installation at issue fell within the concept of a ‘heat benchmark sub-installation’ or that of a ‘fuel benchmark sub-installation’.

59It is apparent from the request for a preliminary ruling that the foundry at issue in the main proceedings uses a copper concentrate that contains sulphur as a raw material. The sulphur present in that concentrate is oxidised, successively, in a flash smelting furnace, in a converter and in an anode furnace. The heat thus produced is not measurable and causes the copper ore present in that concentrate to melt, which gives rise to the final product: primary copper. Since the same concentrate also contains carbon, that foundry emits CO₂ into the atmosphere.

60It follows that that foundry produces heat which is not covered by the concept of ‘measurable heat’, within the meaning of Article 3(e) of Decision 2011/278, but by that of ‘non-measurable heat’ referred to in Article 3(g) of that decision, and that that heat is consumed in the manufacture of a product, namely primary copper, for which no benchmark is defined in Annex I to Decision 2011/278.

61Therefore, such a foundry does not fall within either the concept of a ‘product benchmark sub-installation’ or that of a ‘heat benchmark sub-installation’.

62Since, in the present case, the DEHSt has decided that the Rohhüttenwerk Ost foundry is covered by the concept of ‘process emissions sub-installation’, within the meaning of Article 3(h) of Decision 2011/278, while Aurubis maintains that that foundry falls within the concept of a ‘fuel benchmark sub-installation’, within the meaning of Article 3(d) of that decision, it is necessary to determine whether the definition set out in that provision – which takes precedence, where it is applicable, over that definition in Article 3(h) – covers such a foundry.

63In that regard, turning to the question whether, in a foundry with the characteristics referred to in paragraph 59 above, the heat is produced ‘by fuel combustion’, within the meaning of Article 3(d) of that decision, the referring court wishes, in essence, to ascertain whether the DEHSt was entitled to conclude that those words relate only to the complete combustion of fuels which do not come from the raw material used and which may, in the sub-installation at issue in the main proceedings, be replaced by other fuels, such as natural gas.

64In that regard, it should be noted that, as the Advocate General observed in points 42 to 44 of his Opinion, neither Article 3(t) of Directive 2003/87 nor Article 3(d) of Decision 2011/278 limit the scope of the concepts of ‘combustion’ and ‘fuels’ in such a way.

65Since the EU legislature stated, by the definition provided in Article 3(t) of Directive 2003/87, that the concept of ‘combustion’ generally covers ‘any oxidation of fuels’, it cannot be found that combustion, within the meaning of that directive and the acts adopted on the basis of that directive, takes place only where a fuel is oxidised in its entirety.

66Such a restrictive interpretation would be inconsistent with the intention of the legislature as expressed in recital 37 of Directive 2009/29. As is apparent from that recital, the purpose of the insertion of Article 3(t) into Directive 2003/87 was to ‘clarify’ that the concept of ‘combustion’ has a particularly wide scope, covering the activity of ‘all kinds of boilers, burners, turbines, heaters, furnaces, incinerators, calciners, kilns, ovens, dryers, engines, fuel cells, chemical looping combustion units, flares, and thermal or catalytic post-combustion units’. No provision adopted since then by the EU legislature or by the Commission, pursuant to its delegated powers, gives reason to believe that the word ‘combustion’ covers only reactions that involve the complete oxidation of each component of the inputs that are subject to the activity of that industrial production equipment.

67As the Advocate General noted, moreover, in point 48 of his Opinion, which refers to Article 10a(1) of Directive 2003/87 and recital 1 of Decision 2011/278, the scheme for the free allocation of emission allowances is intended to incentivise reductions in greenhouse gas emissions and energy efficient techniques. The profit that can be derived from selling allowances that have been allocated, but no longer have to be returned where the operator concerned has reduced its emissions by investing in innovative techniques, forms an integral part of that incentive (see, to that effect, judgment of 12 April 2018, PPC Power, C‑302/17, EU:C:2018:245, paragraph 27). Therefore, the fact that, as a result of such investments, that operator makes a greater profit from allowances received free of charge on the basis of the criteria laid down in the applicable legislation does not undermine the objective of the ETS.

68Consequently, in the absence of any clarification to the contrary in Decision 2011/278, the words ‘fuel combustion’ in Article 3(d) thereof must be applied in accordance with their meaning laid down in Article 3(t) of Directive 2003/87, which covers any oxidation of fuels. Since it is common ground that, in a foundry such as the one at issue in the main proceedings, the non-measurable heat is essentially produced by oxidation of sulphur-containing substances present in a concentrate which has been inserted into a furnace, it must be held that the activity of that foundry consists of ‘the production of non-measurable heat by fuel combustion consumed for the production of products’ within the meaning of Article 3(d).

JUDGMENT OF 6. 3. 2025 – CASE C-41/24 WALTHAM ABBEY RESIDENTS ASSOCIATION

must be interpreted as meaning that where, in the context of a screening procedure carried out under that provision, a third party has provided the competent authority with objective evidence as regards the potential significant effects of that project on the environment, in particular on a species protected under Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora, as amended by Council Directive 2013/17/EU of 13 May 2013, that authority must ask the developer to provide it with additional information and take that information into account before deciding whether or not an environmental impact assessment is necessary for that project. However, where, despite the observations submitted to that authority by a third party, the competent authority is able to rule out, on the basis of objective evidence, the possibility that the project in question is likely to have significant effects on the environment, that authority may decide that an environmental impact assessment is not necessary, without being required to ask the developer to provide it with additional information.

Gratsias

Passer

Smulders

Delivered in open court in Luxembourg on 6 March 2025.

Registrar

President of the Chamber

ECLI:EU:C:2025:140

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