2015Guhap5462 Revocation of Disposition, etc. of Allocation of Emission Permits

1. A taking over a lawsuit by a receiver of a cement cement company;

Cement, Inc.

2. A cement cement company;

3. A set-off industry company;

4. A cement cement company;

5. Hyundai Cement Co.

The Minister of Trade, Industry

Sungyang Co., Ltd.

December 8, 2016

February 2, 2017

1. On December 1, 2014, the Minister of Environment revokes the allocation of greenhouse gas emission permits to the Intervenor joining the Defendant.

2. On December 1, 2014, the Minister of Environment issued a rejection disposition of allocation of each greenhouse gas emission permit as stated in attached Table 1 to the Plaintiffs is revoked.

3. Of the costs of lawsuit, the part resulting from the intervention in the lawsuit is assessed against the Intervenor joining the Defendant, and the remainder is assessed against the Defendant

The same shall apply to the order.

1. Details of the disposition;

A. On September 12, 2014, the Minister of Environment designated and publicly announced a company subject to allocation of emission permits under Article 8 of the Act on Allocation and Trading of Greenhouse Gas Emission Permits (hereinafter “Emission Trading Act”) as an entity subject to allocation of cement industry, and designated the Plaintiffs and the Intervenor joining the Defendant (hereinafter “Supplementary Intervenor”) as an entity subject to allocation of cement industry.

B. On September 16, 2014, the Minister of Environment publicly announced a national emission permit allocation plan (hereinafter referred to as “emission permit allocation plan”) in accordance with Article 3(8) of the former Enforcement Decree of the Act on the Allocation and Trading of Greenhouse Gas Emission Permits (amended by Presidential Decree No. 27181, May 24, 2016; hereinafter referred to as “Enforcement Decree of the former Act on the Trading of Emission Permits”); and Article 3(8) of the Enforcement Decree of the Act on the Allocation and Trading of Greenhouse Gas Emission Permits (hereinafter referred to as “Enforcement Decree of the Act on the Trading of Emission Permits”).

C. The Plaintiffs and the Intervenor filed an application for allocation of greenhouse gas emission permits with the Minister of Environment from September 15, 2014 to October 14 of the same year during the period of application for allocation of emission permits, and the Defendant allocated greenhouse gas emission permits to the Plaintiffs and auxiliary intervenors as indicated below (hereinafter referred to as “instant allocation disposition”). Accordingly, even though the Plaintiffs were recognized by the Minister of Environment as having the expected amount of greenhouse gas emissions such as the estimated amount of greenhouse gas emissions as indicated in the attached Table 1 attached hereto, the Plaintiffs were denied the allocation of excess emission permits to the Plaintiffs and auxiliary intervenors as described in the table below (hereinafter referred to as “the instant allocation disposition”). Accordingly, even if the Plaintiffs were recognized by the Minister of Environment as having the expected amount of greenhouse gas emissions such as the estimated amount of greenhouse gas emissions as indicated in the attached Table 1 attached hereto (853,413tCO2eq in the case of the Plaintiff Cement Co., Ltd.) (1tCO2-eq = 1KU (KAU) and hereinafter referred to as “KU”).

【Unit: KAU】

A person shall be appointed.

D. Meanwhile, on August 23, 2012, when considering the reduction of greenhouse gas emissions due to a collapse accident in a stone collection plant located in a land-based plant, the Plaintiff Ammmph Amph, filed an objection with the Minister of Environment on August 23, 2012, that greenhouse gas emissions should be calculated and allocated on the basis of the annual 201 emission levels. On February 6, 2015, the Defendant received an objection by Plaintiff Dmph Amph Amph cement Co., Ltd. on the ground that the Defendant additionally allocated Plaintiff Dmph Cmph Amph, for a planning period of 66,833,949 KU to allocate greenhouse gas emissions to Plaintiff Dmphmmph Cmph, 15,767,10 KU + 66,839 KU, 839KU, and the competent authority changed the instant disposition to the Ordinance of the Ministry of Environment and the instant disposition of rejection (hereinafter referred to as “Defendant Amphan”) as the Defendant’s Disposition.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1, 2 and 3 (including each number), the purport of the whole pleadings

2. Determination on the main safety defense of the Defendant and the Intervenor

A. Main Safety Defenses

The Plaintiffs filed the instant lawsuit with the assertion that the instant allocation disposition with the purport of allocating excessive greenhouse gas emission permits to the auxiliary intervenor by means of false or unjust means classified as their cement type. The instant allocation disposition is unlawful and revoked, and that the portion to be properly allocated to the Plaintiffs was not so allocated as the instant rejection disposition. However, the Plaintiffs did not have specific rights infringed upon due to the instant allocation disposition, and even if the instant allocation disposition is revoked, the revocation of the allocation is not naturally assigned to preliminary portion in accordance with the Emission Trading Act, and thus, it cannot be re-assignmented to the Plaintiffs. Accordingly, there is no legal interest in seeking the revocation of the instant allocation disposition. The instant lawsuit is unlawful.

B. Determination

1) A third party, who is not the other party to an administrative disposition, is entitled to a decision of the propriety thereof by filing an administrative litigation seeking the revocation or invalidity confirmation of the administrative disposition, even if the third party is legally protected due to the administrative disposition. The term “legal protected interests” refers to individual, direct, and specific interests protected by the relevant administrative disposition and relevant laws and regulations (see, e.g., Supreme Court Decision 2009Du10512, Jun. 10, 2010).

2) In full view of the following grounds and circumstances derived from the relevant provisions, such as the Emission Trading Act, if the whole or partial revocation of the instant allocation disposition causes a part of the share allocated to cement industry as emission volume, the relevant scope must be retroactively allocated to the competent authority for the pertinent cement industry regarding the refusal of allocation among those entities eligible for allocation in the same cement industry. Therefore, even if the Plaintiffs are not the other party to the instant allocation disposition, it may be deemed that the Plaintiffs’ interests protected by the law due to the instant allocation disposition were infringed. Accordingly, the Plaintiffs are entitled to sue seeking revocation of the instant allocation disposition.

① According to Article 5(1)1 and 4 of the Emission Trading Act, Article 12(1) and (2) of the former Enforcement Decree of the Emission Trading Act, and accordingly, a plan to allocate emission permits prepared by the Defendant, the Defendant set the State’s outlook (BAU: Busi Business U.S.) and performance-based emission targets under Article 42 of the Framework Act on Low Carbon, Green Growth (hereinafter “Framework Act”) to preferentially determine the State’s total emission allowances and the total emission allowances for each type of business within the scope of the total emission allowances, the amount of emission permits for each type of business is determined within the scope of the total emission allowances, and the amount of emission permits for each type of business is determined within the scope of the total emission allowances, and the company classified as the same type of business is not a structure that determines the total emission allowances for each type of business recognized by the Defendant by the combination of emission allowances recognized by the Defendant.

(2) According to the current allocation method of emission permits by type of business and company as classified by the same type of business as the present, if the total amount of emission permits recognized by the defendant as the expected emission volume by type of business exceeds the total amount of emission permits by type of business, each business entity eligible for allocation shall be allocated emission permits in a quantity less than the emission

(3) In such cases, the adjustment coefficient (the coefficient calculated by dividing the allocation by type of business to all business entities eligible for allocation in the same type of business) shall be applied when calculating the allocation by business entity is calculated. Since the adjustment coefficient is also changed following the change of recognized quantity by other business entities eligible for allocation in the same type of business, the recognized amount of business entities eligible for allocation shall directly affect the determination of allocation to all other business entities eligible for allocation in the same type of business (i.e., when part of recognized amount of business entities eligible for allocation is revoked, the adjustment coefficient is higher by itself and the allocation of all other business entities eligible for allocation in

(4) According to Articles 19 and 33(1) of the Emission Trading Act, a business entity eligible for allocation may trade allocated emission permits by means of sale and purchase, or by any other means, and if emission permits submitted by a business entity eligible for allocation are less than the actual emission quantity, a business entity eligible for allocation may be subject to administrative sanctions, such as penalty surcharges not exceeding three times the average market price of emission permits in the relevant implementation year within the extent of KRW 100,000 per

⑤ According to Article 17(1)5 of the Emission Trading Act and Article 22(5) and (9) of the Enforcement Decree of the Emission Trading Act, when the whole or part of allocated emission permits is revoked by fraud or other improper means, it may be interpreted that the revoked emission permits are not allocated to the Plaintiffs even after the revocation of the allocation of emission permits. However, the provision that allows the revocation of the allocation of emission permits to be transferred to a preliminary portion following the revocation of the allocation of emission permits can be applied to cases where the Defendant’s allocation of emission permits is in dispute due to the lapse of the filing period. Accordingly, each of the dispositions of this case, in which the Plaintiffs filed within the filing period, did not have any potential dispute until now, the above provision is not applicable, and only the issue of “small-sum allocation for the portion that should have been originally allocated to the Plaintiffs if the anticipated greenhouse gas emissions of the Intervenor were calculated lawfully and appropriately at the time of each disposition of this case remains.”

3) Therefore, the defense of the principal safety by the Defendant and the Intervenor is without merit.

3. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

For the following reasons, the Defendant issued an illegal calculation of the amount of greenhouse gas emission permits to supplementary intervenors and issued the instant disposition of allocation, and thus, it should be revoked, and the instant disposition of rejection is also revoked on the premise that the instant disposition of allocation is legitimate.

1) The Intervenor has rapidly increased greenhouse gas emissions by intentionally concentrating and reworking low efficiency idle facilities in the year 2013, the last year of the base year for the first commitment period (three years from January 1, 2011 to December 31, 2013; hereinafter referred to as “base year”). This is also confirmed in comparison with the Intervenor’s subsidy for statistical smoke compensation issued by the Korea Cement Association in the year 2012 and 2013, respectively, and the greenhouse gas emission outcome sharply increased compared to the increase in greenhouse gas emissions. As such, there is a serious error in the specifications, etc. submitted by the Intervenor used in calculating greenhouse gas emissions, etc., or the said specifications, etc. were prepared by false or unjust means.

2) The Defendant: (a) deemed the Intervenor’s 1 small-scale facility (Seoul Metropolitan Area No. 037; hereinafter “S. No. 1”) that was already installed and operated by the Intervenor, which is anticipated to be recorded as greenhouse gas emissions from the year 2014 following the base year; and (b) additionally allocated emission permits to the Intervenor on the ground that the Intervenor’s 2 small-scale facility (No. 035; hereinafter “No. 2”, which was already installed and operated by the Intervenor, was confirmed as greenhouse gas emissions from the year 2013, which was the last year of the base year; and (c) on the ground that the record of greenhouse gas emissions was confirmed in combination with the facilities set forth in subparagraph 1, it shall be deemed that the Intervenor’s 2013 facility was newly established in the last year of the base year; and (d) it shall not be classified as a new facility in the absence of physical addition. However, each of the instant facilities cannot be classified as a new facility.

B. Relevant statutes

Attached Table 2 shall be as stated in the relevant statutes.

(c) Fact of recognition;

1) Since 2010, the Intervenor prepared a detailed statement stating the amount of cleaner production, greenhouse gas emissions, etc. within the workplace (hereinafter “detailed statement of this case”) and submitted it to the Defendant after receiving verification from the Korean Standards Association, etc.

2) The base year greenhouse gas emissions of the Intervenor’s base year identified by the instant specification, etc. are 4,137,071KU in 201, 4,770,089KU in 201, 5,573,116KU in 201, and 5,573,116KU in 201. 3) The Intervenor calculated the total amount of five base facilities (i.e., 1, 2, 3, 5, 6, hereinafter referred to as “all base facilities”), and based on this, drafted the instant specification.

4) On the other hand, the Cement output of the Intervenor’s Cement as indicated in the Statistics Year 2012, 2013, and 2014, published by the Korea Cement Association, does not coincide with the specification of this case.

5) Since the completion of December 29, 1969, each of the instant facilities has not been significantly expanded since its extension on June 1985.

6) The facility referred to in subparagraph 1 was discontinued from before the base year to the completion date of the base year, and re- operated as tin and tin and production facilities in 2014.

7) The facility set forth in subparagraph 2 was operated as a sprinkler production facility in 2010, which is the immediately preceding year of the base year, after being operated as a separate product production facility in 2011, was operated in 2012, and was operated as a sprinkler production facility in 2013. The supplementary intervenor reported to the Defendant that: (a) the facility set forth in subparagraph 2 was operated in 201; (b) the serial number 031 at the time of the cleaner production in 2010; and (c) the serial number at the time of the cleaner production in 2011; (d) the serial number at the time of the cleaner production in 2013; and (e) the serial number at 035 at the time of the cleaner production in 2013. [Grounds] There is no dispute; (c) each entry in Gap, 4, 5, Eul, 10, 11

(d) Whether an assistant intervenor's greenhouse gas emission levels are calculated falsely;

1) According to Article 12(1) and (2) of the former Emission Trading Act and Article 12(1) and (2) of the former Enforcement Decree of the Emission Trading Act, the Defendant’s establishment and notification of detailed methods for calculating emission permits by business entity eligible for allocation under Article 2014-159 of the Ministry of Environment’s notification on September 12, 2014, the former Guidelines on Allocation, Adjustment, and Revocation of Greenhouse Gas Emission Permits (amended by Ordinance of the Ministry of Environment No. 2016-100, Jun. 8, 2016; hereinafter “former Guidelines”) Articles 10, 11, 13 [Attachment 1], 14, and 15(1) of the former Guidelines on Allocation of Greenhouse Gas Emission Permits (amended by Ordinance of the Ministry of Environment No. 2016-10, Jun. 8, 2016), the business entity eligible for allocation determined annually emission permits to be allocated by year in compliance with the allocation review committee based on the numerical coefficient applied thereto.

As such, the calculation of greenhouse gas emissions in the standard year is the basic premise for the calculation of allocation of greenhouse gas emission permits. Article 44(1) and (2) of the Framework Act provides that controlled entities (the plaintiffs were designated as controlled entities at the time of the implementation of the target management system, and they were excluded from the target management system pursuant to Article 10 of the Emission Trading Act as they were designated and announced as business entities eligible for allocation on September 12, 2014) shall report the statement of greenhouse gas emissions to the government in a way that can be measured, reported, and verified each year (for the same purpose, Article 24(1) of the Emission Trading Act also provides that business entities eligible for allocation shall report the statement of greenhouse gas emissions actually discharged to the defendant within three months from the end of each compliance year in a way that can measure, report, and verify the reliable statement of greenhouse gas emissions when reporting the statement (Article 24(1) of the Emission Trading Act).

2) The following circumstances, which are acknowledged by the aforementioned evidence, evidence No. 16 evidence, appraiser B’s appraisal results, and the overall purport of arguments, i.e., (e., statistical reports published by the Korea Cement Association, cannot be viewed as a statement of greenhouse gas emissions provided for in Article 24(1) of the Emission Trading Act, and Article 44(1) of the Framework Act, since such statistics were not prepared in a 6-year increase of 10-year emission facilities from 2000 to 27-year increase of 16-year emission facilities, (ii) the number stated therein is merely based on the data sent by the relevant member cement company without verification by an external verification body, and thus it is difficult to find as a reference material for calculating greenhouse gas emission. (iii) On the other hand, the statement of this case was prepared in accordance with Article 44(1) of the Framework Act for the 10-year increase of 20-year total emission facilities from 2010 to 2014.

It is reasonable to deem that the Intervenor accurately recorded the Intervenor’s standard year’s cleaning volume, greenhouse gas emissions, etc., and contrary to the Plaintiffs’ assertion, it is difficult to deem that the Intervenor falsely prepared the instant statement in order to recognize the Intervenor’s excessive amount of production and greenhouse gas emissions in the base year.

3) Therefore, this part of the plaintiffs' assertion is without merit.

E. Whether each of the instant facilities constitutes a new facility

1) According to Articles 10, 11, and 13 [Attachment 1] of the former Allocation Guidelines, the calculation criteria for allocation of greenhouse gas emission permits by business entity eligible for allocation are as follows. In other words, allocation of greenhouse gas emission permits by business entity eligible for allocation is classified into prior allocation that is determined before the commitment period and additional allocation allocated during the commitment period, which is the "annual allocation fixed before the commitment period." The annual allocation of greenhouse gas by business entity eligible for allocation is calculated by multiplying the adjustment coefficient after excluding the excess emission of greenhouse gas in the base year as controlled entities in the relevant compliance year of the facility applicable to the performance-based facilities (GF method: Grefaing method) and anticipated greenhouse gas emission quantity in the pertinent compliance year (BM method: Benchk method) of the facility subject to the Convention, excluding the excess emission of greenhouse gas in the base year, and then the adjustment coefficient is calculated by multiplying the emission permits (in relation to emission permits allocation plan, the "progching activity of cement facilities, such as the plaintiffs and intervenors, by BM method).

The estimated greenhouse gas emissions in the pertinent compliance year, which are calculated by GF or BM, shall be calculated by aggregating the estimated greenhouse gas emissions in the existing facility in the base year and the estimated greenhouse gas emissions in the expected new or expanded facility, which is anticipated to be installed or expanded in the last year in the base year (excluding facilities newly established or expanded in the last year in the base year) and in the base year, and the estimated greenhouse gas emissions in the base year are divided into newly established or expanded facilities in the last year in the base year. The estimated greenhouse gas emissions in continuing operation facilities are based on the annual average greenhouse gas emissions in the base year three years, and the new or expanded facilities (excluding new or expanded facilities newly established or expanded in the last year in the base year in the base year) are to be calculated based on the annual average greenhouse gas emissions in the base year from the year immediately after the year in which the facilities are newly installed or expanded to the last year in the base year. Moreover, the anticipated greenhouse gas emissions in the facilities expected to be installed or expanded are to be determined based on the annual average greenhouse gas emissions emissions in the last year in the base year and the expected greenhouse gas emissions coefficient in the application rate.

2) As seen earlier, the calculation method of expected greenhouse gas emissions vary depending on which facility is deemed to be a continuously operated facility, and in particular, in cases of a newly constructed or expanded facility among existing facilities in the base year, unlike the case of a continuously operated facility, the calculation of annual greenhouse gas emissions is based on the period of actual emission, not on the average of three years in the base year, but on the basis of the actual emission period, and in cases of a anticipated newly established or expanded facility, the estimated greenhouse gas emissions are to be calculated according to a specific formula separate from the anticipated greenhouse gas emissions in the existing facility. Therefore, in cases of an enterprise that owns or possesses a newly established or expanded facility, it would have an important impact on the calculation of anticipated greenhouse gas emissions that mean a newly established or expanded facility, since both anticipated greenhouse gas emissions and the estimated greenhouse gas emissions allocated based on the calculation period. Accordingly, the nature of each facility stipulated in the former Guidelines, and in particular, the provisions related to newly constructed or expanded facilities, should be faithfully interpreted in the meaning of language and text, and should not be excessively construed without reasonable grounds.

3) In full view of the facts acknowledged earlier based on the foregoing interpretation criteria, each of the facilities of this case, which were expanded on June 1, 1985 after the completion of December 29, 1969, does not constitute a facility physically added after January 1, 201, which is the starting point of the base year, and thus, cannot be deemed to be a facility newly established in the last year of the base year prescribed in the former Allocation Guidelines [Article 10(1)1(c) of the former Allocation Guidelines] or Article 10(1)2(a) of the former Allocation Guidelines for the Installation of New Facilities (Article 10(1) of the former Allocation Guidelines]. The main grounds are as follows.

(1) Article 2 subparagraph 12 of the former Allocation Guidelines, "new establishment" is defined as "physical addition of emission facilities, which separately report the emission volume in the specifications and conduct activities of producing greenhouse gases independently from existing facilities for production activities."

② On the other hand, Article 2 subparagraph 20 of the former Allocation Directive defines ‘physical addition' as ‘new' not only the physical removal of ‘closed' but also the case of continuous suspension of operation.

③ When defining ‘the start of operation' in subparagraph 1 of Article 2 of the former Allocation Guidelines, ‘the start of operation' and ‘the start of operation' are different from ‘the start of operation', it is reasonable to regard ‘the start' and ‘the start of operation' as different concepts.

④ Even if the former Guidelines clearly distinguish the operation of facilities following the establishment and extension of new facilities and the re-operation of facilities after the closure of a re-operation plan during the commitment period after closure of Article 10(3)4 of the former Guidelines, the former Guidelines clearly distinguish the operation of facilities following the establishment and extension (Article 10(3)4 of the former Guidelines does not include an estimated greenhouse gas emission quantity on the sole basis of the fact that a re-operation plan exists during the commitment period after the closure).

⑤ It is difficult to say that the establishment of a new facility is naturally included in the category of the new establishment because it means the establishment and installation of a new facility.

(6) The mere fact that a facility installed and installed before April 14, 2010, when the Framework Act was in force, has been re-run from a voluntary point of time after April 14, 2010, and from that time, there is a detailed statement under Article 44(1) of the Framework Act on the facility, it is difficult to regard the facility as a newly installed facility. In particular, since the Defendant can sufficiently grasp whether the facility was installed and installed before April 14, 2010, the detailed statement on the relevant facility was reported since April 14, 2010. The Defendant’s determination of the facility as a newly installed facility is not legitimate and justifiable.

7) Unlike the estimated amount of greenhouse gas emissions from a facility newly established in the base year, in the case of a facility newly established in the base year, it is necessary to separately calculate the estimated amount of greenhouse gas emissions on the basis of the quantity of greenhouse gases emitted or to be emitted from the newly established facility, on the basis of the actual operation period during the base year. In the case of a facility to be newly established, the basis for calculating the amount of greenhouse gas emissions is that the enterprise is highly likely to continuously operate the facility installed and installed with substantial expenses in the future. As such, it is sufficiently anticipated that the amount of greenhouse gas emissions from the facility will increase in proportion thereto, and it is necessary to separately calculate the estimated amount of greenhouse gas emissions based on the quantity of greenhouse gases emitted or to be emitted from

8) However, if a business entity eligible for allocation calculates the estimated greenhouse gas emissions in a way different from the case of a facility that is re-run after the beginning of the base year, the nature of the facility is determined according to the intent of the business entity eligible for allocation. The amount of greenhouse gas emissions recognized as a business entity eligible for allocation is considerably likely to be distorted and calculated by the business entity eligible for allocation (e.g., the amount of limited emissions of a business entity eligible for allocation which has 1, 2, or 3 is fixed to the extent of 180. On the 1 and 2 years in the base year, only 90 times each at the 1, 2, or 3th period in the base year, the operation of 3rd period is suspended, and it is assumed that 60 times each at the 1, 2, or 3th period in the base year, the amount of greenhouse gas emissions recognized as a new facility in the base year, such as the defendant, and it seems that there is no possibility that the business entity will newly install the new facility or 360th unit.

4) Therefore, this part of the plaintiffs' assertion is with merit.

F. Scope of revocation of each of the dispositions of this case

1) According to the above facts, among the instant disposition of allocation, facilities expected to be newly established under Article 10(1)2(a) of the former Guidelines for Allocation among the instant disposition of allocation, and facilities newly established in the last year of the base year under Article 10(1)1(c) of the former Guidelines for Allocation, and the part of the allocation of greenhouse gas emission permits during the commitment period by applying the adjustment coefficient should be revoked as illegal. Of the instant disposition of rejection, if the expected greenhouse gas emissions of each of the instant facilities were not illegally calculated, the portion of the refused greenhouse gas emission permits should also be revoked, including the part of the greenhouse gas emission permits allocated to the Intervenor revoked, even though they were more allocated to the Plaintiffs.

2) However, in order to cancel only illegal part of each of the dispositions in this case, the estimated greenhouse gas emissions expected to be recognized should be calculated first if each of the dispositions in this case is deemed to be facilities other than new facilities, and the adjustment coefficient should also be calculated again (the part of the adjustment coefficient is changed). Based on this, reasonable allocation of greenhouse gas emission permits to auxiliary intervenors is calculated, and the calculation amount and calculation amount are different from the calculation amount of the disposition in this case, the part of the legitimate allocation of greenhouse gas emission permits to the plaintiffs and the disposition of this case should be revoked. The data in this case alone cannot be calculated. Thus, the entire disposition in this case should be revoked to calculate the amount of greenhouse gas emission permits to auxiliary intervenors and the plaintiffs.

4. Conclusion

The plaintiffs' claims are justified and accepted in entirety.

The judge of the presiding judge shall be Jin only

Judge Song Byung-hun

Judges Song Jong-hwan