For years, Poland’s right-wing government has been threatening to legally challenge the EU’s climate policy, and this summer it delivered on that threat. Climate and Environment Minister Anna Moskwa announced on 8 August the country has petitioned the European Court of Justice to strike down the recent revision to the EU’s Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), which is set to start levying a fee on climate-unfriendly imports on 1 October. Both are key components of the Fit for 55 package, the legislative toolbox designed to deliver on the goals of European Commission President Ursula von der Leyen’s Green Deal.
“The introduction of CBAM fees will translate into an increase in the cost of imported products and electricity, as well as products manufactured in Poland for the end user,” Moskwa said in a statement. Regarding the ETS, Moskwa said Poland objects to the increase in allowances that will keep the price of carbon high, which “may reduce the level of energy security” of EU countries at a time when that security is being threatened by Russia.
The substance of the laws was decided by majority votes of EU countries earlier this year, in which opposition by Poland and Hungary was overcome. Poland is not only challenging the substance of the laws based on their effects, but also the way the laws were adopted. Because the laws will affect the economy, they are “primarily of a fiscal nature”, Moskwa said, and therefore the ordinary voting system should not have been used but rather a special legislative procedure which requires unanimous approval by all EU member states. Were the EU’s high court to agree, the laws could be invalidated and sent back to the Council for another vote, at which time Poland and Hungary would veto them.
Poland already challenged four other pillars of Fit for 55 earlier this summer: the ban on combustion engine car sales by 2035; the reduction of free allowances in the ETS; increased EU forest management; and the overall increase of the EU’s greenhouse gas emissions reduction target. Poland’s heavy use of coal and energy security concerns have made it the chief opponent of EU climate policy for two decades. They have tried and failed in the past to challenge EU climate policy with the high court. In 2016 they took the European Council and European Parliament to court for passing a law establishing a market stability reserve in the ETS to raise the price of carbon, which was drastically too low to be effective. They used the same argument – that the law needed to be decided by unanimity. This argument was rejected by the European Court of Justice.
Legal experts say Poland’s chance of success at the European Court of Justice this time around is also not high – but there is a big question mark hovering over the CBAM legislation. “Such a justification, i.e. the protection of state interests presented as in the Polish government’s complaints, will not work – as confirmed by the court’s well-established previous jurisprudence in similar cases,” says Robert Grzeszczak, a professor of European law at the University of Warsaw.
“Besides, it’s a double-edged weapon. If Poland managed to challenge EU law on the grounds of its state interests, so could any other state challenge any other arbitrary act, precisely on the grounds of protecting national interests. This is not sufficient on its own, specific infringements must be demonstrated which would cause the act to be annulled by the court.” He adds that Poland’s argument that the wrong voting method was used is also unlikely to hold water with the court since it is specifically taxation that needs unanimity votes, not all fiscal policy.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
This is precisely why the Commission has been so insistent on not calling the levy a “carbon border tax” and rather using the cumbersome formulation of CBAM. A “tax” would have required unanimous approval, and the EU executive likely expected Poland to veto the proposal. That is what makes CBAM perhaps the most vulnerable of all the pieces of legislation challenged. If the high court were to rule it is in fact a tax and not an “adjustment mechanism”, it would be sent back to the Council, where Poland would kill it. Given that companies are already preparing for the start of the mechanism on 1 October, this could cause major disruption – especially if the court makes a ruling after CBAM has taken effect. A ruling before 1 October, or even by the end of the year, is unlikely.
“Based on similar actions, it can take two years or more for a judgment to be rendered and the contested rules are generally not suspended during that period,” consultancy Ernst & Young said in a note to clients. “The action could have significant impact on CBAM and the EU’s Green Deal in the medium-term. Withdrawal of the CBAM Regulation, in full or part, could jeopardise the EU Commission’s plans for the EU economic zone’s competitiveness among industries that are subject to ETS regulations.”
“Given the fast-approaching 31 January 2024 deadline for submitting the first CBAM report covering Q4 2023, businesses need to continue their efforts to prepare for their CBAM compliance obligations,” it added.
Climate of hostility
Although they do not believe Poland’s legal challenge will be successful, NGOs are warning that were the court to rule in Warsaw’s favour on CBAM, or the other pieces of legislation, it could cause the overall framework of the EU’s climate efforts to collapse. They say Poland is playing a dangerous political game.
“Warsaw’s blanket opposition towards major Fit for 55 regulations should be mainly understood in the context of the quickly approaching parliamentary elections [in Poland],” says Michał Smoleń, head of the energy and climate programme at the NGO Instrat. “Hostility towards more ambitious EU climate policies have unfortunately become just another topic for the competition between different right-wing factions, both inside and outside the ruling coalition.”Read more from this author: Dave Keating
This exploitation of anti-climate-laws sentiment is not limited to Poland’s far-right government. Europe’s centre-right has also been flirting with such populist messages ahead of the EU and UK elections next year. And this comes while the EU this week lost its green champion, Executive Vice President Frans Timmermans. On Tuesday, Timmermans officially resigned his post to run to become prime minister of the Netherlands in the upcoming Dutch election. He will be replaced by Maroš Šefčovič, the EU commissioner from Slovakia.
Šefčovič, in charge of interinstitutional relations, has been a master at the art of compromise – the opposite of Timmermans’ sometimes hard-headed approach. Timmermans has been loathed by the Polish and Hungarian governments, and their domestic media, because of his actions against them for rule of law violations during the previous commission term of 2015–2019.
The more compromise-minded Šefčovič, a neighbour of Poland and Hungary, could find a way to defuse the situation and convince Poland to drop its legal challenges – perhaps after the Polish election is over. But some worry that, with Timmermans gone and President von der Leyen looking ahead to her prospects of re-appointment next year, the Commission is now more likely to back down and weaken the remaining elements of the Fit for 55 package amid pressure from Europe’s right.
It may be that Poland can succeed in at least partially dismantling the EU’s Green Deal without winning any of its legal challenges, simply by intimidating the EU executive against proposing and further ambitious legislation. Either way, these legal moves could have a major effect on the future of EU energy policy.