On 1 July 2014, the day that the Belgian regional regulators (VREG, BRUGEL and CWaPE) gained competence over distribution grid tariffs, the Court of Justice of the European Union (“CJEU”) refrained from burdening them with the consequences of a drastically changed support scheme for renewable energy. In its ruling in case C-573/12, the CJEU found that renewable energy support schemes that award green certificates only to electricity producers located within the territory of the concerning Member State, while excluding electricity producers located in other Member States, are in principle no prohibited import restriction as meant by Art. 34 of the Treaty on the Functioning of the European Union (“TFEU”).
Facts of the case
On 30 November 2009, Ålands Vindkraft, a green electricity producer, submitted an application to the Swedish energy agency (the Energimyndigheten) for the Oskar wind farm, which is located on the Åland archipelago in Finland, with a view to being awarded green certificates.
The Energimyndigheten refused this application by its decision of 9 June 2010 on the grounds that only green electricity production installations in Sweden can be awarded green certificates.
Consequently, Ålands Vindkraft brought an action before the förvaltningsrätten i Linköping (the “referring court”) to have that decision annulled and to seek approval of its application. In particular, it alleged that Art. 34 TFEU had been violated, arguing that the Swedish support scheme’s awarding of only green certificates to local electricity producers created a barrier to trade—more particularly a barrier to electricity imports.
The förvaltningsrätten i Linköping decided to stay the proceedings and to refer four questions to the CJEU for a preliminary ruling.
Compatibility with the Renewable Energy Directive
The first preliminary question asked by the referring court was, a.o., whether Art. 2(2)(k) and Art. 3(3) of Directive 2009/28 (the “Renewable Energy Directive”) allow a Member State to establish a support scheme which awards green certificates only to producers located within the territory of that Member State (§38).
The CJEU answered this preliminary question affirmatively, stating that Art. 3(3) of the Renewable Energy Directive states explicitly that, without prejudice to Arts. 107–108 TFEU, Member States have the right to decide to what extent they will support energy from renewable sources that is produced in another Member State (§51). In other words, the EU legislature explicitly left open the possibility of such a territorial limitation (§49).
Furthermore, the Renewable Energy Directive makes a distinction between green certificates and guarantees of origin, whereby the latter’s sole purpose is to reveal to final customers the proportion of energy from renewable sources in an energy supplier’s energy mix (§52).
A barrier to trade …
In its second and third preliminary questions, the referring court asked whether Art. 34 TFEU must be interpreted as meaning that a support scheme which limits the award of green certificates to the own national territory, and which places suppliers and certain electricity users under an obligation to surrender annually to the competent authority a certain number of those certificates, constitutes a measure having equivalent effect to a quantitative restriction on imports, and if so, whether that measure is justifiable (§55).
The CJEU started by stating that it has consistently held that, where a matter has been the subject of exhaustive harmonisation at EU level, any national measure relating thereto must be assessed in the light of the provisions of that harmonising measure and not in the light of primary law (e.g., Case C-309/02, Radlberger Getränkegesellschaft and S. Spitz, §53 and the case-law cited) (§57). The CJEU noted, however, that the Renewable Energy Directive did not seek to bring about exhaustive harmonisation of national support schemes for green energy production (§59).
Therefore, the CJEU continued by reminding that the free movement of goods between Member States is a fundamental principle of the TFEU, and that it is settled case-law that Art. 34 TFEU on import restrictions covers any national measure capable of hindering, directly or indirectly, actually or potentially, intra-Community trade (e.g., Case 8/74, Dassonville, §5) (§66).
From this, the CJEU concluded that the effect of the support scheme with a territorial limitation is to, at least potentially, curb electricity imports from other Member States (e.g., Case 249/81,Commission v Ireland, §§27-29) (§73).
… that can be justified
The fact that a renewable energy support scheme with a territorial limitation would fall within the scope of Art. 34 TFEU does not mean that it cannot be justified, however.
In this regard, the CJEU noted that the use of renewable energy sources for the production of electricity is useful for the protection of the environment inasmuch as it contributes to the reduction in greenhouse gas emissions, which are amongst the main causes of climate change that the European Union and its Member States have pledged to combat. Such policy is designed to protect the health and life of humans, animals and plants (cf. Case C-379/98, PreussenElektra, §75) (§78-80). Therefore, a justification on one of the public interest grounds listed in Art. 36 TFEU is at hand (§80).
However, such justification must also be proportionate: it must be appropriate for securing the attainment of the legitimate objective pursued, and it must be necessary for those purposes (§83).
Ålands Vindkraft contested that the Swedish support scheme was proportionate for two reasons.
It argued firstly that the environmental protection objective underlying the increased production and consumption of green electricity might be pursued within the European Union as a whole, regardless of whether that increase flows from installations located in the territory of a particular Member State (§93).
The CJEU stated in this regard that a green energy support scheme, whose production costs seem to be still quite high when compared with the costs of electricity produced from non-renewable energy sources, is inherently designed to foster—from a long-term perspective—investment in new installations by giving producers certain guarantees about the future marketing of their green electricity (§103). Therefore, as EU law currently stands, the Kingdom of Sweden was legitimately considered that such a territorial limitation does not go beyond what is necessary in order to attain the objective being pursued by both the Renewable Energy Directive and the Swedish support scheme (§104).
Ålands Vindkraft argued secondly that since the Swedish support scheme contained an annual obligation for suppliers and certain users of electricity to hold and to surrender to the competent authority a certain number of electricity certificates, failing which they must pay a specific fee, domestic green electricity producers could, by coupling the sale of electricity and electricity certificates, promote the sale of the former (§117).
However, the CJEU found that a support scheme, by its very nature, requires for its proper functioning market mechanisms that are capable of enabling traders to obtain certificates effectively and under fair terms (§113). Payment of a fee when not meeting the quota obligations could be considered necessary as an incentive, provided that the fee itself is proportionate (§116). Consequently for the CJEU, the fact that a support scheme does not prohibit producers of green electricity from selling both the electricity and the green certificates to traders under the quota obligation, does not mean that the legislation is disproportionate (§118). The CJEU considers that the fact that such a possibility remains open rather appears to be an additional incentive for producers to increase their production of green electricity (§118).
Must a territorial limitation be laid down explicitly in the legislation?
Finally, the referring court asked the CJEU whether the restriction of the territorial scope for the award of green certificates must be laid down explicitly in the concerning legislation, since that was not the case for the Swedish support scheme (§120).
The CJEU rather briefly answered this question, stating that where Member States adopt measures by which they implement EU law, they are required to respect the general principles of that law, which include the principle of legal certainty (§125). The CJEU, however, left it to the national court to decide whether the principle of legal certainty was respected in the case at hand, taking into account all relevant elements which emerge from the terms, objectives, or general scheme of that legislation (including the parliamentary preparations) (§132).
Impact of the ruling of the CJEU
Notably, the CJEU did not follow AG Bot in his assessment of the Swedish support scheme. While the AG considered the Swedish support scheme not to be justifiable under Arts. 34–36 TFEU and even considered Art. 3(3) of the Renewable Energy Directive to be incompatible with the Treaties in so far as it allows for territorially limited support schemes, the CJEU did not come to the conclusion that there had been a violation of Art. 34 TFEU or the provisions of the Renewable Energy Directive.
The case at hand only concerned the Swedish support scheme. It is, however, likely that its conclusions can be transposed to the Belgian regional support schemes. In a case still pending (Joined Cases C-204/12, C-205/12, C-206/12, C-207/12, C-208/12, Essent/Belgium), similar preliminary questions were referred to the CJEU regarding the Flemish support scheme through green certificates. Since the Swedish support scheme seems to be very similar in essence to the Flemish one, one might expect that this pending case will have a similar outcome.
One another means that the CJEU upholds many national support schemes for renewable energy as they stand, with territorial limitations. Indeed, the CJEU kept in mind that national mandatory targets for renewable energy under the Renewable Energy Directive may require support schemes being limited to the national territory.