Art. 34 TFEU does not generally prohibit Member States to restrict their national renewable energy support schemes to energy generated within their own territory
Article 3 of the Renewable Energy Directive 2009/28/EC provides that Member States must meet the minimum renewable energy targets set out in the Directive 2009/28/EC Member States may apply support measures for renewable generation, and may also enter into cooperation mechanisms with other Member States. Member States may decide to what extent they will support renewable energy generated in other Member States.
Sweden’s electricity certificate scheme, established in 2003, is a support scheme for the production of electricity from renewable energy sources, according to which approved producers are awarded an electricity certificate for each megawatt-hour (MWh) of renewable electricity produced. Those certificates may then be sold to electricity suppliers or to certain users, who are under an obligation to meet a certain quota corresponding to a proportion of the total quantity of electricity supplied or consumed, failing which they must pay a fee.
Ålands Vindkraft AB (“Ålands”), a power producer, sought for approval from the Swedish regulator to participate in the Swedish renewable energy support scheme for its wind farm. The plant was located on an island off the Swedish shore, but – while being an autonomous region – administratively belonging to Finland. It was only connected to the Swedish, not to the Finnish grid. However, the Swedish regulator rejected Ålands’ application on the grounds that only renewable electricity production installations located in Sweden were eligible to participate in the Swedish renewable energy support scheme. Ålands filed an appeal against the decision of the Swedish regulator in the Swedish court, arguing that its wind farm supplied Sweden with renewable power and that excluding it from the Swedish support scheme amounted to unfair discrimination and a violation of the fundamental freedom of free movement of goods enshrined in Article 34 of Treaty on the Functioning of the European Union (“TFEU”). The Swedish court referred the matter to the Court of Justice of the European Union (“CJEU”) for a preliminary ruling on the interpretation of the Directive 2009/28/ECDirective 2009/28/EC and its relationship to Article 34 TFEU.
II. AG Bot’s conclusion
In his conclusion dated 28 January in this case, Advocate General (“AG”) Bot expressed the view that although the Swedish national renewable energy support scheme complies with the Directive 2009/28/EC, as a matter of fact, it violates the sanctity of the long established principle of free movement of goods in that Article 3(3) of the Directive 2009/28/EC which permits a Member State to deny or restrict access to its national support regime to producers whose plants are situated in other Member States.
AG Bot in particular argued that the internal electricity market was an objective of the European Union (EU) and that the integration of renewable electricity into that market was an objective of the Directive 2009/28/EC. He refuted any argument which stated that imported renewable electricity cannot be proven to actually stem from renewable energy sources on the basis that Directive 2009/28/EC created the concept of guarantees of origin, which would allow tracing the origin of the electricity. Thus, allowing the Member States to restrict their support schemes only to renewable electricity generated within the own territory was not necessary or proportionate to achieve any objectives of environmental protection. In the end he recommended that rather than taking retrospective effect, the Commission should within two years amend the Directive 2009/28/EC in order to rectify the conflict between its rules in Article 3(3) and the free movement of goods.
The CJEU first dismissed the argument put forward by the Swedish and German Governments that renewable energy subsidisation had been the subject of exhaustive harmonisation with the adoption of the Directive 2009/28/EC so that any national measure relating thereto had to be assessed on the basis of the Directive 2009/28/EC alone. According to the CJEU, the RES Directive is “far from seeking to bring about exhaustive harmonisation of national support schemes for green energy production”, and hence does not preclude the examination of territorial restrictions in national renewable energy support schemes in light of Article 34 TFEU.
Under EU law, measures that restrict the free movement of goods can be justified if they are aiming at protecting the environment and are proportionate and not discriminatory. Meanwhile, according to the established case law of the CJEU, restrictions to this principle may be justified on one of the grounds listed in Article 36 of the Treaty on the Functioning of the European Union (“TFEU”) or by overriding requirements.
In its judgment, the CJEU ruled that though Swedish support scheme is in compliance with Article 2 and Article 3(3) of Directive 2009/28/EC, and admitted that “the legislation at issue is capable, in various ways, of hindering — at least indirectly and potentially — imports of electricity, especially green electricity, from other Member States”, there was no breach of Article 34 TEFU on the grounds that the Swedish national legislation justified “by overriding requirements relating to protection of the environment”, and was proportionate to that end.
Under the assessment of proportionality, CJEU mentioned that “since, in particular, EU law has not harmonized the national support schemes for green electricity; it is possible in principle for Member States to limit access to such schemes to green electricity production located in their territory” hence considering that it “is difficult to determine its specific origin and, accordingly, its systematic identification at the consumption stage as green electricity is difficult to put into practice”, therefore, in accordance with the Directive 2009/28/EC, “Member States must be able to control the effect and costs of their national support schemes according to their different potential.”
By overruling Ålands’ argument that the Swedish territorial limitation was no longer necessary, as Sweden had already fulfilled its requirements relating to those targets, “such a territorial limitation may in itself be regarded as necessary in order to attain the legitimate objective pursued in the circumstances, which is to promote increased use of renewable energy sources in the production of electricity.” According to the Court, though Sweden already reached its target, the national scheme intends to foster investments in new installations and gives producers certain guarantees about “the future marketing of their green electricity, thus assuring investors’ confidence”
CJEU thus concluded that “considered together with that territorial limitation, the other features of the legislation at issue in the main proceedings to which the referring court refers support the conclusion that, viewed as a whole, that legislation meets the requirements entailed by the principle of proportionality”, the restriction is justified by the public interest objective of promoting the use of renewable energy sources in order to protect the environment and combat climate change.
In terms of the workability of the current system foreseen by the Directive 2009/28/EC, which is based on different national targets, the Court confirmed expressly that Member States must be able to remain in control of their national support schemes, and that territorial limitation contribute to investor confidence, which can in turn of enabling those States to meet their mandatory targets under the Directive 2009/28/EC with regard to the production of green energy in their territory.
 Conclucions of the advocate general, 28.01.2014Case C-573/12.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 59.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 63.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 38-44.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 67.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 77-82.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 94.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 96.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 99.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 92.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 103.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 83
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12, paragraph 130.
Distinguishing between different renewable energy resources in the context of the renewable energy support scheme does not necessarily constitute discrimination
This request to the Court of Justice of the European Union (“CJEU”) for a preliminary ruling, made by the Belgian constitutional court, concerns the interpretation of Directive 2004/8/EC on the promotion of cogeneration based on a useful heat demand in the internal energy market and amending Directive 92/42/EEC (hereinafter “Directive 2004/8/EC”). The request was made in proceedings between Industrie du bois de Vielsalm & Cie SA (“IBV”) and the Walloon Region concerning the issue of applications of the rules relating to financial support mechanisms for energy generated through cogeneration. IBV uses wood and/or wood waste to ensure its own power supply through cogeneration. In 2008, IBV introduced an application before the Walloon energy regulator, CWaPE, to benefit from the favorable green certificates system as organized under Art. 38 of the Walloon Electricity Decree. However, under the criteria set out in that provision, i.e. (i) the concerned facilities/installations must mainly use biomass except for wood or wood waste, (ii) the installations must be part of a sustainable development process and (iii) they must be particularly innovative, IBV was not considered by the Walloon government to be able to benefit from the favorable support mechanism.
IBV brought a claim before the Council of State. The Council of State doubted whether the favorable Walloon regime for biomass, which according to the Walloon Electricity Decree does not apply to wood and wood waste, did not violate the principle of equality and non-discrimination (Articles 10 and 11 of the Belgian Constitution). It referred a preliminary question to the Constitutional Court, which in its turn referred the question to the CJEU.
With regard to the first part of the preliminary question, the CJEU noted that the scope of Article 7 of Directive 2004/8 is not limited solely to cogeneration plants which are high efficiency cogeneration plants.
Considering the importance of (i) the second part of the first preliminary question, and (ii) the second preliminary question, the CJEU decided to consider these questions together.
CJEU started by stating that where a Member State adopts measures to support cogeneration and renewable energy sources within the EU framework, and while implementing EU law, “it must observe the principle of equal treatment and non-discrimination laid down in particular in Articles 20 and 21 of the Charter”. Therefore, the CJEU drew the conclusion that “the principle of equal treatment and non-discrimination requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified”.
Concerning “the choices to be made when drawing up the national support schemes for cogeneration and electricity production from renewable energy sources which Directives 2004/8/EC and 2001/77/EC aim to promote”, the Court declared that “it clearly derives from these directives that the Member States retain a broad margin of discretion”. Each Member State is allowed “to choose the regime that corresponds best to its particular situation, taking account the specific national circumstances especially regarding climatic and economic conditions”.
CJEU then noted that there are considerable differences between the different renewable energy sources and highlighted that it was particularly necessary to consider (i) the renewable nature of the resource, its availability, (ii) the prudent and rational utilisation of natural resources (sustainable development), and (iii) the security of supply of each of the sources. In this regard, the CJEU constituted that wood “ is a resource whose renewal requires a long period, may be distinguished from agricultural products or household and industrial waste, whose production takes place in a much shorter space of time”.
Coming back to the question of the design of the support scheme, the CJEU found that “it is common ground that the overall environmental impact resulting from the increased use of biomass for energy production following from certain support measures, differs according to the particular characteristics of the type of biomass used”. As regards the environmental impact that could follow from enhanced support measures for the use of wood and/or wood waste for energy production, “it may thus prove necessary to take into account that any excessive or premature deforestation which may be encouraged by such support measures, is liable to contribute to an increased presence of carbon dioxide in the atmosphere and adverse effects on biodiversity or water quality”. Furthermore, due to the different resources of biomass, “(i)t should also be noted that the various categories of biomass listed in Article 2(b) of Directive 2001/77 include various kinds of waste. Recital 8 in the preamble to Directive 2001/77 states, moreover, that the support granted by Member States for renewable energy sources should be consistent with other European Union objectives, in particular with respect to the waste treatment hierarchy.” And thus “wood waste can be re-used or recycled in the relevant industrial sectors and such treatment may, in the context of that hierarchy, have to be given priority over energy recovery”. Thus it should be assessed differently. Biomass from wood/wood waste could thus be distinguished from other biomass sources based on the different characteristics of the resources.
Taking into account the factors stated above and the broad margin of discretion for the Member States, the CJEU drew the conclusion that biomass from wood and/or wood waste is not comparable to biomass from other sources. “The need to be able to treat those various categories of biomass differently, including with regard to the amount of the support, must therefore be regarded as inherent”. The Member States “do not manifestly exceed the limits of their broad discretion when granting different amounts of support to biomass” from wood and/or wood waste compared to other categories of biomass.
Accordingly, the distinction in the Walloon support scheme between biomass from wood/wood waste and other biomass was not considered discriminatory and the different treatment was justified on the different qualities.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 1.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 41.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 42.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 49.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 50.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 61.
 Same as above.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 62.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 74.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 75.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 76.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 78.
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 78
 See, inter alia, IBV & Cie, C-195/12, EU:C:2013:598, Paragraph 81.
 Same as above.
Confirmation of Ålands – Member States can restrict their support schemes to nationally produced renewable energy
Directive 2001/77 (“the Directive”) provided that the Member States had to establish arrangements for issuing guarantees of the origin of electricity produced from renewable sources. A Member State must recognize a guarantee issued by another Member State. In the Flemish region of Belgium, the legislation required suppliers to surrender a certain number of renewable electricity certificates to the regulator, the Vlaamse Reguleringsinstantie voor de Elektriciteits en Gasmarkt (VREG). Failure to submit sufficient certificates could result in a penalty. Only renewable electricity certificates relating to renewable electricity generation located in the Flemish region qualified towards the quota. Essent Belgium, a Belgian electricity provider, which had submitted “guarantees of origin” covering renewable electricity generated in the Netherlands, Denmark and Norway as part of its quota requirements between 2005 and 2009. VREG did not accept these guarantees and fined the energy company for failing to comply with its quota obligations. Essent appealed, and the Brussels Court of First Instance referred a number of questions to the European Court of Justice (“CJEU”) for a preliminary ruling, which include whether the Flemish regime was compatible with the Directive, and whether it was compatible with the rules on the free movement of goods, equality and non-discrimination contained in Articles 28 and 18 of the Treaty on the European Communities (TEC – now Art. 34 and 18 of the Treaty on the Functioning of the EU) and their counterparts in the EEA agreement.
II. AG Bot’s Opinion
In his opinion of 8 May 2013 the Advocate General Bot found that there was nothing in the Directive that required the Flemish Region to assimilate the “guarantees of origin” regime established under the Directive with its own “green certificates” regime. The Advocate General noted, however, that in the absence of harmonization of national support schemes under the Directive, those schemes nonetheless had to respect the Treaty rules on free movement of goods. In that context, the Flemish scheme clearly had the effect of distorting competition between the producers of renewable electricity (treated as goods for Treaty purposes) in the Flemish Region versus those in other Member States.
The Advocate General (“AG”) was not persuaded that the discriminatory treatment of renewable electricity from other Member States under the Flemish scheme could be justified either on environmental protection or security of supply grounds. Looking at environmental protection, first of all, the AG took the view that renewable electricity produced outside the Flemish Region could be said to contribute to the reduction in greenhouse gas emissions in the Flemish Region in the same proportion to that produced within the Flemish Region. He also dismissed the suggestion (mainly coming from a waste context) that the principle of tackling environmental damage at source would apply in this context. Turning to security of supply, the AG was not persuaded that the promotion of domestic renewable electricity production could be said to promote any greater security than the development of greater interconnection between national networks either.
On the basis of above, the Advocate General’s opinion was that the Flemish scheme was incompatible with the Treaty requirements on free movement of goods.
The Court, not surprisingly, follows its recent decision in the Åland Vindkraft case and justifies the restrictions to the free movement of goods contained in the Flemish green certificates scheme (non-eligibility of foreign-produced certificates or guarantees of origin for the purpose of compliance), based on the provisions of the Directive.
First of all, CJEU examined on whether Article 5 of the Directive on the promotion of electricity produced from renewable energy sources in the internal electricity preclude the Flemish scheme of green certificates or not. It finds that in the Directive, guarantees of origin and national support schemes are covered by different rules and that there is no link between them, “there is nothing in the wording of Articles 4 and 5 or in the recitals in the preamble to the Directive to suggest that the EU legislature intended to establish a link between the guarantees of origin and national support schemes for the production of green energy”, “that national legislation or a national practice that constitutes a measure having equivalent effect to quantitative restrictions may be justified on one of the public interest grounds listed in Article 30 EC or by overriding requirements”. In fact the Directive provides specifically that the guarantee of origin scheme hence it does not automatically “confer any entitlement to benefit from national support mechanisms for green energy”.
Secondly, the CJEU observes that the Flemish scheme of green certificates is capable of hindering imports of electricity, especially renewable electricity from other Member States. Electricity suppliers, as a matter of fact, are required to purchase certificates based on the electricity that they import, which may lead to a result that “producers of green electricity have the possibility of selling their green certificates together with the electricity they produce seems capable in practice of facilitating the opening of negotiations and the establishment of contractual relationships”, meaning that the scheme itself consequently “constitutes a measure having equivalent effect to quantitative restrictions on imports, in principle incompatible with the obligations under EU law resulting from Article 28 EC, unless that legislation can be objectively justified“.
The CJEU therefore examined whether the scheme was justifiable on one of the public interest grounds listed in Article 30 EC (now Article 36 TFEU) or by the “overriding requirements” developed in the case-law and whether it satisfied the test of proportionality.
First, the CJEU finds that the purpose of the scheme was found in the promotion of the use of renewable sources for producing energy. The measure thus aimed at protecting the environment and combating climate change. In this regard, the Court recognizes that it is justified that the measures favoring the transactions to green energy be focused on the production “at the production stage that the environmental objectives in terms of the reduction of greenhouse gases can actually be pursued“ and furthermore acknowledged that in a system such as the Flemish one using renewable electricity certificates, it is appropriate to reserve the system exclusively to renewable electricity produced in the regional territory and hence constitutes no infringements of the principle of proportionality.
The CJEU in this regard also reiterated that Member States are allowed by the Directive to set national targets of production of green energy, acknowledging that “it is essential that Member States be able to control the effect and costs of their national support schemes“, suggesting that diverted national support schemes are inherently important means of means of achieving the aim of the Directive which eventually “is to guarantee the proper functioning of support mechanisms for renewable energy sources at national level”.
Nevertheless, the CJEU also highlighted again the two conditions mentioned in its previous case law, that is that
Under such conditions, the CJEU thus confirmed that principally the free movement of goods does not conflict national renewable electricity support schemes.
 CONCLUSIONES DEL ABOGADO GENERAL SR. YVES BOT presentadas el 8 de mayo de 2013 (1), para 110
 CONCLUSIONES DEL ABOGADO GENERAL SR. YVES BOT presentadas el 8 de mayo de 2013 (1), para 108-109
 CONCLUSIONES DEL ABOGADO GENERAL SR. YVES BOT presentadas el 8 de mayo de 2013 (1), para 93
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12.
 See, inter alia, Ålands Vindkraft AB v. Energimyndigheten C-573/12.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 39.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 83.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 86.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 88.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 89-112
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 95.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 98.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 103.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 98.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 102.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 101.
 See, inter alia, Joined Cases C-204/12 to C-208/12, Essent Belgium NV v. Vlaamse Regulieringsinstantie voor de Elektriciteitsen Gasmarkt, 11. september 2014, para 116.
Member States may not unilaterally extend the Community framework for the support of renewable energies
On 26 November 2014, the Court of Justice of the European union (CJEU) answered some questions by the Italian Consiglio di Stato concerning the interpretation of the external competences of the European Union (prior to the adoption of the Lisbon Treaty, thus as established in the case-law) in conjunction with the then applicable rules on guarantees of origin for renewable electricity found in Article 5 of the “old” Renewable Electricity Directive, Directive 2001/77/EC, (now replaced by the current Renewable Energy Directive, Directive 2009/28/EC), and the Free Trade Agreement with Switzerland. The questions had arisen in proceedings between Green Network SpA and the Autorità per l'energia elettrica e il gas concerning an administrative fine imposed by the latter on Green Network for its refusal to purchase green certificates in an amount corresponding to the quantity of electricity which that company had imported into Italy from Switzerland. Green Network argued that they had supplied guarantees of origin proving the renewable energy characteristics of such electricity and thus considered their obligation under Italian law to have a certain amount of renewable energy in their energy supply mix to be met. Italian law provided that guarantees of origin from third countries, i.e. outside the European Union, would be eligible for meeting this obligation subject to the existence of an international agreement to that end, and in fact Italy had at some point entered into such an agreement with Switzerland. However, in case, Green Network had tried to use Swiss guarantees of origin predating the agreement, and in the course of the proceedings the Consiglio di Stato became doubtful as to whether Italy could conclude a valid agreement on a topic – guarantees of origin for renewable electricity – regulated by the European Community.
The CJEU now ruled that the EU enjoys exclusive external competence relating to the promotion of electricity from renewable energy sources through guarantees of origin in the Internal Market, and that such competence precludes a provision of the Italian law, which allows the extension of the use of guarantees of origin and the promotion of electricity from renewable sources to third countries such as Switzerland.