ruling by the European Court of Justice (ECJ) on Tuesday 1 July confirmed that renewable energy support schemes that restrict cross-border trade may be justified by “overriding requirements relating to the protection of the environment”.

Ålands Vindkraft AB v Energimyndigheten Case C-573/12

The case involved a Swedish support scheme for renewable energy which awards certificates to green electricity producers within Sweden.  These certificates may then be sold on to electricity suppliers and certain users.  Such suppliers and users have an obligation to purchase a certain quota of certificates corresponding to a proportion of electricity supplied or consumed.  The higher cost of production of renewable energy is thus supported by suppliers and consumers through the green certificate system.

Ålands Vindkraft applied to the competent Swedish authority for approval of its Oscar wind farm, located in the Åland archipelago in Finland, with a view to the award of electricity certificates.  The application was refused on the ground that only green electricity installations located in Sweden may be awarded such certificates. 

Ålands Vindkraft challenged this decision in the Swedish court arguing that the effect of the Swedish support scheme was contrary to the principle of free movement of goods.  It claimed that the operation of the scheme meant that approximately 18% of the Swedish electricity consumption market is reserved to green electricity installations located in Sweden and that this was to the detriment of electricity imports from other Member States.

The Linkoping Administrative Court made a reference to the ECJ asking whether the Swedish electricity certificate scheme was compatible with EU law.

ECJ judgment

The ECJ made two findings on the question submitted by the Swedish court.  First, the Swedish support scheme is compatible with the Renewable Energy Directive (Directive 2009/28/EC) insofar as it supports the production of electricity.  The directive does not require a green electricity support schemes adopted by one particular Member State to be extended to cover green electricity produced in the territories of other Member States.

Second, the ECJ agreed that the Swedish support scheme did have the capability of hindering imports of electricity from other Member States and that it constituted a restriction of the free movement of goods.  However, the ECJ held that this restriction was justified by the public interest objective of promoting the use of renewable energy sources in order to protect the environment and combat climate change. 

The ECJ commented that for the purposes of attaining the objective pursued (proportionality), measures promoting the transition to green energy justifiably target the production, rather than the consumption, stage.  The ECJ also conceded that, as EU law currently stands, Sweden is legitimately able to reserve its national support scheme to the national production of green electricity.  It further noted that such support schemes are necessary to foster, from a long term perspective, investments in new green energy installations.

In all the circumstances, the ECJ was able to find that that the scheme is consistent with the principle of the free movement of goods.