Absorbing EU ETS windfall profits and the principle of free allowances: Iberdrola and others

Publishers Abstract:
Discussed is the Oct 17, 2013, Judgment of the European Court of Justice (Fifth chamber) in the Joined Cases C-566/11, C-567/11, C-580/11, C-591/11, C-620/11, and C-640/11, Iberdrola and others v. Administracion del Estado. In the present judgment, the Fifth Chamber of the EU tackled for the first time the question of windfall profits generated as a consequence of the application of EU law.

The main problem was whether a levy adopted by Spain to cover the extra profits obtained by electricity undertakings as a consequence of free allowances received under the European Emission Trading Scheme (EU ETS), was in conformity with the EU ETS rule which requires at least 95% of allowances to be allocated free of charge to all installations under such scheme for the years 2005-2007. The formula used to calculate the levy entailed that the more Greenhouse Gas emissions were reduced, the more had to be paid under the levy.