Theory and Practice of Emissions Trading in the European Union: Some Reflections on Allowance Allocation in Light of the DK Recycling Case

In its judgment of 22 June 2016, DK Recycling und Roheisen GmbH v. Commission, the Court of Justice ruled on an appeal brought by a German undertaking operating installations subject to the European Union Emissions Trading System (EU ETS), i.e. a “carbon market” where operators trade greenhouse gas emission allowances. At issue in the case were the rules on free allocation of emission allowances. After putting the case in context by providing an overview of the normative framework of the mechanism, the present analysis examines how the case contributes to the un-derstanding of the theoretical implications of the EU ETS.