One of the largest fuel companies in Sweden, which has a refining capacity of more than 18 million m³ of crude oil each year, wants to expand the capacity of its refinery in Western Sweden. The investment of approximately Skr15 billion would mean that:
- the refinery would become self-sufficient in vacuum gas oil; and
- the fuel company would reduce its production of heavy oil in favour of high-quality fuels.
The process of refining crude oil is considered environmentally hazardous due to the large number of carbon oxides released. The fuel company estimates that the planned expansion will increase its greenhouse gas emissions from 1.7 million tons up to a maximum of 3.4 million tons per year. This would correspond to a significant portion of the total current emissions from all industries in Sweden.
The company's operations and its emission of carbon dioxide were subject to assessment by the Environmental Court in a previous admissions test for an expansion of its operations (MÖD 2008:40). A number of plaintiffs claimed that the project was contrary to Sweden's national climate goals management and recycling principles. The Environmental Court came to the following conclusion:
Although there is a global need to stop burning fossil materials, such as the company's raw materials and products, there will be a need for such products in the foreseeable future. In this perspective, the company's project means good housekeeping, as the crude oil will be refined into more qualified products. The refinery has a high energy efficiency for the industry. Thus, there are no overarching principles that hinder the admissibility of the project as such.
Judicial proceedings concerning environmentally hazardous activities
The Environmental Code aims to promote sustainable development. Sweden's environmental quality goals specify the meaning of sustainable development in accordance with the Environmental Code. In order to fulfil the Environmental Code's aims, some activities are classified as environmentally hazardous, for which permission must be granted by the Land and Environment Court.
The refinery in question is part of the EU emissions trading system, which means that under the Environmental Code, no limit can be placed on its emissions of carbon dioxide. The ban on carbon dioxide limitation is based on the fact that:
- the emissions trading system aims to implement a cost-effective and joint reduction of climate-impacting emissions within the European Union; and
- placing conditions on carbon dioxide emissions could interfere with the trading system's functioning.
However, under Chapter 17(3) of the Environmental Code, the government can reserve the right to test the permissibility of an activity that could make it significantly difficult to achieve the environmental goals set out by Parliament.
In 2016 the fuel company applied for a permit for existing and future operations at its refinery in Western Sweden. On 9 November 2018 the Land and Environmental Court in Vänersborg granted the company permission for the measures sought. The permit was appealed to the Land and Environmental Court of Appeal, which granted leave to appeal.
The Environmental Protection Agency and the Society for Nature Conservation notified the government that the fuel company's planned activities could have a significant environmental impact and requested that the government conduct a permit test.
On 22 August 2019 the government decided to examine the admissibility of the refinery's activities. The case was thus passed from the Land and Environmental Court of Appeal to the government. The government's decision has not yet been handed down.
During the continuing process, the company adjusted the calculated emissions to 2.7 million tons of carbon dioxide and presented a number of measures to reduce carbon dioxide emissions.
Court independence versus government reservations
The Constitution states that no authority, not even parliament, can decide how a court should judge an individual case or apply the rule of law. This principle of the rule of law is fundamental to the Swedish legal system, as it is in most other legal systems.
Under Chapter 17(3) of the Environmental Code, the government rather than the Supreme Court is the highest judicial body with regard to permit examinations. On the one hand, government scrutiny can be seen as desirable, as political responsibility for approved actions can be demanded. On the other, the review system risks creating unclear practices regarding the largest and most significant investments, which are highly dependent on reliable assessment data to be realised.
An important aspect of the predictability requirement is that legal rules can be relied on. Government-conducted permission tests entail an uncertainty of outcome, as examinations are carried out by a politically controlled body. Government assessments should consider the Environmental Code's requirements; however, there is greater scope for discretion compared with other examining authorities. The Environmental Code explicitly states that the government may grant certain exemptions to allow an activity that would otherwise be impermissible.
The legislature has decided that official decisions which could have a major impact on future environmental conduct should be made at the political level rather than through a judicial review. Even if a political examination will be carried out in accordance with applicable law, there is an explicit risk of political influence on a decision, which is why the admissions test was established. Companies that aim to make large investments in activities that fall under the Environmental Code run the risk that official decisions regarding their activities will be coloured by the prevailing environmental policy. Although there are benefits to politicians being accountable for decisions regarding businesses that have a significant environmental impact, it remains to be seen whether the legal uncertainty in this regard will inhibit the willingness of companies to expand into Sweden.
Full article available at internationallawoffice.com