Emissions trading and coronavirus: meet your deadlines!

Shutting down social and economic activities is hitting companies subject to emissions trading at a very unfavourable time: according to the German Greenhouse Gas Emissions Trading Act (Treibhausgas-Emissionshandelsgesetz, TEHG) the emission reports must be verified and submitted to the German Emissions Trading Authority at the German Environment Agency (DEHSt) by the end of March. The emission certificates must then be surrendered by the end of April. There is no provision for extending the deadlines laid down by EU law.

The statutory deadline for submitting the emission reports for the year 2019 is Tuesday, 31 March 2020 (Section 5 (1) TEHG). The emission reports must be verified by a verification body. If this deadline is not met, the emissions trading account of the installation concerned must be blocked in accordance with Section 29 TEHG. DEHSt has no discretion in this regard. In addition, the non-timely reporting of emissions becomes an offence under Article 32 (1) No. 1 of the German Act on Regulatory Offences (Gesetz über Ordnungswidrigkeiten, OWiG) due to the failure to meet the deadline. Such an offence may be punished with a fine of up to EUR 500,000.

Emission allowances must be surrendered by Thursday, 30 April 2020. If this deadline is not met, a payment obligation of EUR 100 per tonne of greenhouse gas equivalent for which an emission allowance not been surrendered on time is to be determined (plus inflation rate) in accordance with Section 30 (1) TEHG, regardless of who is at fault.

If companies are prevented from fulfilling their legal obligations as a result of the pandemic, DEHSt has the option in principle of refraining altogether from opening administrative fine proceedings in connection with regulatory offences (discretionary principle). Possible breaches of duty could also be appropriately taken into account when assessing the level of fault. However, according to current practice, strict standards would have to be applied, for example to the operational organisation. It becomes problematic, for example, if only one single employee is responsible for fulfilling the obligations under emissions trading law and this employee is absent due to illness. Regardless of the current situation, arrangements to cover absences from work will always have to be in place for such a case if one does not want to run the risk of being accused of organisational negligence.

The law only provides for a discharge for failure to meet deadlines for the surrender of emission allowances in one case: under Section 30 (1) sentence 3 TEHG, the imposition of a sanction payment can be waived in the case of force majeure. According to the case law of the European Court of Justice (ECJ) on emissions trading, a case of force majeure only exists if the operator of the installation concerned can invoke an external cause, the consequences of which are unavoidable and inevitable and make it objectively impossible for those concerned to comply with their obligations. To this end, the ECJ requires an assessment of whether, despite all efforts that may have been made to meet the prescribed deadlines, the undertaking concerned was faced with unusual and unforeseeable circumstances beyond its control (ECJ, judgment of 17 December 2013 - C-203/12, Billerud Karlsborg AB and Billerud Skärblacka AB v Naturvårdsverket, para. 31). The court also requires an affected company first of all to make every effort to meet the deadline.

At present, no one can predict what restrictions the pandemic will entail in the coming weeks. However, companies should in any case make every effort in order to be able to meet the statutory deadlines (and document these efforts). It would be sensible to fulfil the obligations as early as possible and not to postpone them "until the last minute". In the event of foreseeable difficulties in meeting the deadline, DEHSt should be contacted without delay. An official suspension of the deadlines is not provided for by law. However, the pandemic and corona may also require exceptional measures in the area of climate protection law.