The article explores the EU ETS enforcement regime and will be of particular interest to companies participating in the carbon market, holding emission allowances, or otherwise subject to the NEa’s supervisory and enforcement powers. It covers both the existing EU ETS 1 framework for industrial installations and aviation and EU ETS 2, which will gradually extend emissions trading to sectors such as buildings and road transport from 2027 onwards.

At the heart of the discussion is the mandatory penalty of EUR 100 for each emission allowance that is not surrendered. The penalty applies automatically where insufficient allowances are surrendered and leaves no room for mitigation or consideration of the specific circumstances of the case. 

While the Court of Justice of the European Union has repeatedly upheld the compatibility of this fixed penalty with the EU law principle of proportionality, the article questions whether the regime remains consistent with modern standards of legal protection. In doing so, it examines the principle of proportionality, Article 6 of the European Convention on Human Rights and Articles 47 and 49 of the EU Charter of Fundamental Rights.

The article argues that a sanctioning regime that does not allow for consideration of culpability, context or proportionality sits uneasily with fundamental rule of law principles and that the current penalty framework may warrant re-evaluation.

The full article is available in the Dutch Journal of Energy Law.

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If your organisation is dealing with EU ETS compliance obligations, emission allowances or enforcement action by the Dutch Emissions Authority (NEa), please feel free to contact one of our regulatory experts. We regularly advise companies on the legal and practical implications of the EU ETS and the NEa’s supervisory and enforcement powers.