The EU Court of Justice rules in favour of Sweden in the Åland Vindkraft Case

The EU Court of Justice rules in favour of Sweden in the Åland Vindkraft case: no mandatory opening of national support schemes for the time being. Read Catherine Banet’s comment on the EU Court of Justice decision.

In a landmark decision delivered on 1 July, the Court of Justice of the European Union deems the Swedish green certificates scheme conform to EU law. It confirms that, based on the Renewable Energy Directive 2009/28/EC and the Treaties, national governments can continue restricting access to their support schemes to renewable electricity generated on their territory.

Factual background

Sweden has been running a tradable green certificates scheme since 2003. The scheme plays a central role in the country’s renewable energy policy. In 2009, Åland Vindkraft applied for a permit to receive green certificates for its wind farm Oskar, which is located on the Finnish territory but connected to the Swedish grid. The responsible authority, the Swedish Energy Regulator (Energimyndigheten), refused to deliver the permit, a refusal which motivated Åland Vindkraft to bring the case before the national court. When examining the complaint, the Administrative Court in Linköping put forward a request for preliminary ruling before the EU Court of Justice to clarify the interpretation of several EU law provisions.

The Court did not follow its Advocate General

Following the proceedings, Advocate General Yves Bot delivered on 28 January 2014 his conclusions in the case. He was clearly in favour of the removal of barriers to the eligibility of foreign produced electricity to national support schemes for renewables, as this is currently backed in Directive 2009/28/EC. He also deemed Article 3.3 of the Directive – which allows the restriction – contrary to primary EU law and proposed reviewing the provision within a period of two years. The drastic solution proposed by A.G. Bot created much uncertainty among actors of the renewable energy industry and the Member States, although only four states submitted written observations to the Court. Even the European institutions tried to re-open the case but without success.

A potential restriction justified by environmental protection requirements

One point that the Court agrees on, together with its Advocate General, is that the Swedish scheme is capable of altering imports of electricity, especially electricity from renewables, originating from other Member States. It follows that the Swedish scheme constitutes a so-called measure having equivalent effect to restrictions on imports, which is in principle incompatible with Article 34 TFEU, unless it is objectively justified. In his conclusions, A.G. Bot called upon a clarification of the Court’s case law on the extent to which environmental protection could be applied to such discriminatory measures. The Court answers his request, in a clear and short manner, focusing its efforts on the assessment of the proportionality of the measure.

A reinforced role for the Renewable Energy Directive and international climate commitments

The Court consecrates the promotion of renewable energy as an environmental protection requirement. Namely, “the objective of promoting the use of renewable energy sources for the production of electricity […] is in principle capable of justifying barriers to the free movement of goods.” To reach this conclusion, the Court makes a direct link between the need to promote renewables and the fulfillment of EU’s international climate commitments. It builds here on previous case law (in Preussen Elektra) and the provisions of the Treaty on public interest grounds (Art. 36) and EU energy policy (Art. 194.1(c)). This conclusion represents consequently both continuity and evolution of the Court’s practice.

Green certificates as an effective support scheme

In addition of fulfilling environmental protection goals, the measure, to be deemed compatible, must be proportional. The Court spends much time, as part of the proportionality test assessment, to evaluate the “effectiveness” of the scheme. This is another important outcome of the case. The fact that green certificates are market-based instruments, and that certificates can be sold separately from electricity allows concluding on the compatibility of the measure. One can wonder here whether the conclusion would have been different with another support scheme, less market-friendly.

A landmark case, but not an ending point

The judgment is based on today’s legislation and the particular shape of the green certificates scheme in Sweden. Meanwhile, the judgment does not answer all pending questions, and both EU legislation and policy may need to be changed in order to attain an “internal market in renewable energy”, if this is still the goal to reach. It would have been very constructive for the coherence in the use of renewable energy instruments that the Court delivered simultaneously its judgment in the Essent Belgium case (C-204/12 to C-208/12), which relates to both green certificates and Guarantees of Origin. At the policy-making level, an important work must now be done under the negotiations of the EU’s post-2020 climate and energy regime, and, later on, the review of the Renewable Energy Directive.

Catherine Banet

Catherine Banet

PhD, Associate Lawyer at Advokatfirmaet Simonsen Vogt Wiig, Oslo, Norway

Catherine Banets’s blog “Sustainable Energy Law notebook”