Emissions trading and EC state aid law

According to the Commission, State aid will, inter alia, always be involved if a Member State allocates more than 95% of the allowances free of charge, thereby foregoing public revenue. However, the Commission ignores that a free of charge allocation of allowances as such, too, constitutes State aid that is imputable to the Member States. By not requesting formal notification of the National Allocation Plans under Article 88(3) EC, the Commission seeks to avoid a strict examination of the State aid question. Considering “that any potential aid is likely to be compatible with the common market should it be assessed in accordance with Article 88(3) of the Treaty” is not sufficient for justifying such a State aid measure. Since the environmental objectives of emission trading can as well be achieved by e.g. auctioning the allowances, a free of charge allocation is not “essential” in the meaning of the exemption clauses in Article 87(3) EC. If the Commission embraces a pragmatic approach and decides to exempt such State aid on political grounds, its decision bears the danger of being annulled by the Court of First Instance.