1 Mihaela Vasileva
ID 10707972
Thesis Supervisor: dr. K. J. Cseres
University of Amsterdam, Faculty of Law
A new era for Renewable Energy in Europe
Research Question: Why the current legal framework regulating RES should be fundamentally revised and what type of measures should be adopted for the implementation of the European Union new strategy in the area of renewable energy?
2 Table of Contents
I. Introduction………..p.3
II. The current state of law and it’s downfalls………p.6
2.1.The 2020 Strategy for RES……….p.6 2.2.The German Renewable Energy Law drama………..p.9 2.3.Closed market: Aland Vindkraft AB v Energimyndigheten……...p.11
2.3.1. Background of the case………....p.12 2.3.2. The legal analysis of the case: CJEU’s juggling with facts and
doctrines. ………p.13 2.3.3. Proportionality: Law vs. Politics. ………...p.15 2.4. The implications of the judgment for the future of RES in Europe…p.16
III. The New Objectives………p.17
3.1.International Agreement on Climate Change, Paris 2015……..…..…. p.17 3.2.The Commitments………...……….p.17 3.3.Towards #EnergyUnion……….p. 19
IV. The Future Legal Framework for RES in Europe: What would be the best design options?...p.18
4.1.The Legislative Roadmap for the implementation of 2030 Strategy….p.19 4.2.The design of the new legal framework……….p.20 4.2.1. The possibility for a common European support scheme…p.22 4.2.2. Harmonization issues………...p.25 4.2.3. Introducing Joint Support Schemes……….p.29
V. Conclusion………..p.31
3 I
Introduction
Climate change has become one of the most urging topics in the recent years. With the Earth's average temperature increasing with about 1 degree global climate change already has observable effects on the environment. An increase of 2°C compared to the temperature in pre-industrial times is seen by scientists as the threshold beyond which there is a much higher risk that dangerous and possibly catastrophic changes in the global environment will occur. For this reason, the international community has recognised the need to keep global warming below 2°C.1 The world leaders have recognized that climate change has become one of the biggest threats for the World and that urgent measures have to be taken. Therefore, combating climate change has become a hot topic on the international scene in the past years. The European Union has been an active actor in this debate and had turn the fight with climate change into one of it’s key policy priorities. As a result of the active international debate and the strong will of the world leaders to reduce greenhouse gas emissions, a crucial international binding agreement on fighting climate is being prepared and is due to be adopted at the Paris climate conference in December. The agreement will take the form of a Protocol and will be applicable to all Parties. EU is determined to achieve results and it presented it’s ambitious targets ahead of the negotiations.2 The commitments it made are incorporated in it’s energy strategy for the next 15 years. EU is determined to cut the greenhouse gas emissions with at least 40% compared to 1990; reach at least 27% of total energy consumption from renewable energy and increase energy efficiency with at least 27%. In long-term EU aims to cut its emissions substantially – by 80-95% in 2050 compared to 1990 levels. In the same time the energy strategy aims at fully integrating the European energy market and with ambitious climate policy at its core, to give EU consumers secure, sustainable, competitive and affordable energy.3 The Energy Union is one of the top priorities of the Junker’s Commission and it’s a crucial one. In the words of Maroš Šefčovič, the Vice-President responsible for the Energy Union, this is one of the most important integration projects for Europe after the creation of the Coal and Steal Community.4 The integration of the green energy market is one of the hot topics discussed in the strategy. The issue has been
1 European Commission website: Causes of climate change. 2 Dröge, Spencer et al. 2015, pp. 4-5.
3 Ibid. 4
4
a key topic of discussions for the European Commission in the past years and with the introduction of the ambitious 2020 programme a series of legislation on the matter was accelerated on European and national level. The Commission adopted a Directive obliging MS to meet their national quota on energy consumption coming from alternative sources in order to reach at least a 20 % share of energy from renewable sources in the Community’s gross final consumption of energy in 2020. However, green energy is quite expensive and in competitive disadvantage towards other sources of energy. That is why the Directive gave the option to MS to choose for support schemes that will promote RE. However, such promotion raised problems as the most effective public supporting schemes would take the form of direct subsidies and would inevitably distort the market competition to a certain extend. Thus, in order to reach some balance and reduce the distortion of the market the Commission has issued Guidelines on State aid for environmental protection and energy. Where MS choose to give subsidies that constitute state aid, they have to notify the Commission and if certain conditions are met the Commission can give a “green light” to the introduction of the scheme. However, the dialogue between the Commission and the Member States in the course of the authorization procedures might take too long. This can have severe negative consequences for investors’ confidence and can delay the development and deployment of renewable energy. What is even more troubling are the legal uncertainties as to what measure constitutes State Aid. This is neither clarified in the guidelines nor in the case law. This lack of clarity creates a loophole for the MS to undermine the European competition law rules. The loophole is created by the fact that Member States are not under the obligation to notify measures that do not constitute State Aid. However, the Commission and the MS have different opinion on what is State Aid.5 That can lead to a situation where a Member States decides not to notify a certain measure, because it does not see it as a state aid. On the other hand, after the measure is already operating the Commission may do an ex-post review and declare the measure as illegal state aid. In a fragmented market, where the Commission has to do an ex-ante review of measures that are notified by MS, monitor for measures that are trying to circumvent the rules and balance between it’s sustainability objectives and strict competition law enforcement, any uncertainties in the rules can cause a delay in the development of the renewable energy.6 This is one of the reasons why, in light of the new environmental commitments, the legal framework has to be fundamentally revised.
5 Sarmadi 2015
6
5
Another reason would be that in the current legal framework there is a clear controversy between EU’s economic and environmental objectives. The supporting measures used to promote the construction of the RE industry favour renewable energy in prejudice of other sources of energy. This is usually done through feed-in tariffs, under which Transmission System operators (TSOs) are under an obligation to purchase a minimum share of RE at a previously determined price.7 This results in market distortion and lack of transparency in the price formation. As a consequence the EU’s long striving and promoted competiveness goal is being affected. At the time the 2020 framework has been designed the achievement of the environmental objective was at the focus and the European Commission has taken an approach that favours to a certain extend the renewable energy promotion over the competitiveness and construction of the internal market goal. Although being aware of the negative effects non-harmonized renewable energy support schemes can have on the process of liberalization of the internal energy market the Commission accepted that the environmental objective is a justifiable ground to accept the consequent market distortion.8 However the situation on the market has changed since and the 2030 framework is about to be designed under different circumstances. We are currently entering a new phase in renewable incentives and a new market model is on the way. Reaching internal energy market has become top priority.9 Now, with the recently issued strategy of the Commission on moving towards European Energy Union and the new targets, the next few years are likely to see increasing pressure on national support schemes to be “competitive, open and potentially harmonised as part of that journey”.10 This puts EU before new policy and legal challenges.The overlap of policies raises the question on how the European Commission will create incentive for MS to increase the production of energy coming from RES in order to achieve the environmental targets and in the same time complete the integration process and secure free competition on the open market? Thus, reaching a balance between it’s economic, environmental and market integration objectives.
In this respect, the first objective of this thesis would be to expose the downfalls of the legal and regulatory framework under which the promotion of renewable energy is currently operating and demonstrate why the IEM objective could not be achieved if the 2030
7 Couture, Cory, Kreycik & Willams 2010 8 De Brée s.d.
9 Rifkin s.d. 10
6
framework doesn’t change the status quo. For this aim two central problems will be first discussed: the lack of legal certainty regarding compliance of support schemes with the European State Aid law and the closed nature of the green energy market. Then, the new strategies and policies of the European Union in the energy field will be presented and arguments will be given on why those could not be achieved if the design of the regulatory framework remains the same. The second objective of this thesis would be to analyse how the new framework could be best drafted in order to balance the sustainability and competitiveness goals in the light of the need for internal energy market.
II
The current state of law and it’s downfalls
2.1.The 2020 Strategy for RES.
It is not just recently that the World has recognized the threat of climate change. In the past decade the world leaders have been taking efforts to reduce carbon emissions. In 1997 after rounds of difficult negotiations the world leaders gathered in Kyoto, Japan in order to adopt the first international binding agreement on climate change under which industrialized countries would reduce their collective emissions of greenhouse gases by 5.2% compared to the year 1990. 11 The European Union was an active party in the negotiations and the 15 countries which were then Member States committed to reduce their collective emissions by 8% in the period between 2008 and 2012. For this first commitment period EU not only achieved, but overachieved the set target by reducing annual emissions to 11.8 % below base year levels. For the second commitment period of 2020, the EU has made a commitment to reduce overall greenhouse gas emissions by 20% compared to 1990 levels.12 For this aim in 2009 the 'climate and energy package' of legislation was adopted and it set the Union on track to achieve its 2020 target. As a part of this programme the EU adopted the “Renewable Energy Directive” (“RED”), which took the implementation of an effective policy on the promotion of RE a step forward. The new Directive established a common framework for promotion of RE and set mandatory targets plus a mechanism to hold MS responsible in case of non-compliance. It fixed mandatory national targets for the overall share of energy from RES in gross final consumption of energy and imposed an obligation on the MSs to promote
11
Brunnée 2015
7
and encourage energy efficiency and energy saving.13 In order to reach those mandatory targets the MS had to establish national support schemes in order to give incentive to investors to produce green energy, because the cost of production of energy from renewable sources is usually very high in comparison with other energy sources, such as fossil fuels. Furthermore, there was a lack of financial support to the RE ventures, because of the lack of trust in the green energy market among investors and banks. Thus, the uncertain development of the green energy market and the significantly high amount of investments needed to develop ventures related to RE production caused significant hesitation among investors to invest in RE power plants.14 Therefore, in order for the 2020 targets to be reached, the policy framework had to be supportive and to stimulate competitiveness of green energy. However, in the same time the measures that were to be taken had to respect the EU State Aid law. In this case scenario, the Member States had the uneasy task to develop national schemes that would support the production of renewable energy while making sure that this support wouldn’t vastly distort competition on the internal market. That was challenging, because the production of green energy could be easily boosted through subsidising mechanisms, but under EU law unjustified direct state aid is forbidden. Therefore it was necessary to find a balance between sustainability and competitiveness.15
Meanwhile, one of the main reasons for the lack of balance is the uncertain rules on the application of the State Aid rules to support schemes. One of the biggest struggles in deciding about State Aid is whether the support at question is “attributable to the State”. This is one of the cumulative conditions provided for in Article 107 TFEU that defines State Aid. 16 Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) introduces the notion of State aid as follows: “Save as otherwise provided in the Treaties, any aid granted by a
Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.” The term “State aid” thus generally refers to “a competitive advantage (1) selectively conferred to one undertaking or group of undertakings (2) by the State or through State resources (3) which distorts or threatens to distort competition (4) and affects trade between the Member States (5).”17
13 De Brée s.d
14 UNEP Collaborating Centre for Climate & Sustainable Energy Finance 2013. p.66 15 COM/2014/015.
16
Koening & Kuhling 2002.
8
Under the first condition what the Court would consider is whether there is any economic advantage given to an undertaking. What is important here is to access whether under “normal market conditions” the undertaking would have the same advantage. The second condition is “selectivity”. What is being accessed at this stage is whether certain undertakings or the production of certain goods are treated different than others. For example, renewable energy support schemes favour producers of renewable energy over other energy generators. Under the third criterion a State involvement is necessary in order for a measure to be constituted as a State aid. The State must be somehow involved in the decision to grant the advantage. This condition proves to be the most problematic, especially in relation to RES support schemes, and it gives rise to uncertainties in the assessment of whether a measure should be allowed or not. According to the judgment of the Court of Justice of the European Union in PreussenElectra it seems that the condition that the grant is “by the State or through
State resources” is cumulative, not alternative. Thus both must be fulfilled and the aid must
stem from State resources and be attributable to the State.18 However, CJEU refrains from giving an exact definition of State Aid and the case-law is broad and inconsistent. This creates uncertainties of whether some schems would be State Aid or not.19 Later, this Chapter will discuss the case law of CJEU concerning this matter in order to exemplify the problem that arises from the lack of certainty on the interpretation of this condition. Classifying a state measure as being state aid or not is important, because Art 108 TFEU requires that State aid measures (i.e. measures satisfying all conditions set out in Art 107 TFEU) adopted by MS should be notified to the European Commission. In principle, prior to explicit authorisation by the Commission the measure cannot be put into effect or if it is, it would be considered that it is applied “unlawfully”.20 The same applies whenever changes are made to existing and approved aid measures. Therefore, any measure that has not been authorised by the Commission, can be challenged. Then, it is up to the Commission to decide whether the measure is indeed unlawful State aid. 21 This decision is taken based on guidelines concerning State aid for energy project. However, yet the circumstances under which the national support schemes will constitute state aid are not clearly explained in the Guidelines. The decisions are being made on a case-by-case basis and predictably that causes delays in the decision-making process since the support schemes are rather complex and expectedly the
18 Baker & McKenzie Client Alert, 2013, pp.1-3. 19 Ibid.
20 European Commission Factsheet: State Aid procedures. 21
9
cases are rather complicated.22 This leads to delays in the development of renewable energy as it could be seen already from the experience of countries such as Austria, Slovenia or Luxembourg where the process was already slow down due to the lengthy discussions between the Member State and the Commission. While the decisions are pending there is no certainty for the industry as regards what the financial support will look like so that informed business decisions are very difficult to make and investors are reluctant to start projects. 23 Furthermore, in scrutinising the compatibility of a measure with the common market, EU State aid rules are based on a system of ex-ante review. The Guidelines serve first of all as a self-assessment tool for MS to check whether their measure should be notified. On the basis of this analysis they could decide whether to notify or not. Only when and if a MS notifies a certain measure, then the Commission makes a decision whether the measure could be justified. In case that the opinion is positive then the scheme can start operating. Member States cannot implement the aid without the explicit approval of the Commission.24
However, this system of self-assessment and the diverging opinions of Member States and the Commission create a regulatory gap. This is a significant downfall of the current system and the recent Commission’s investigation against the German Renewable Energy Law (EEG) could be taken as an example to clarify the problem. The case shows the negative regulatory impact that the differentiation in the opinions of the Commission and the MS on what measures are “State measures” or “attributable to the State” has and the problems arising thereof.25
2.2.The German Renewable Energy Law drama
In 2012 Germany has introduced a reform of it’s Renewable Energy Law within the framework of which it has introduced an EEG-surcharge, which aim was to finance the development of RES. The mechanism was created in order to ease the producers of green energy by distributing the additional costs that they bear among the end users of energy. Logically, this results in higher energy costs for end users. In order to avoid the risk that due to the costs increase German energy-intensive industries will be placed in a disadvantageous position towards their international competitors, Germany has created the possibility for energy-intensive users (EIUs) to be (partially) exempted from the EEG-surcharge. The
22 European Network of Environmental Law Organizations 2014. pp.15-24. 23 Fouquet & Nysten, s.d
24 European Commission Factsheet: State Aid procedures. 25
10
grounds for such exemption were environmental and the rationale behind was that EIU’s may decide to outsource their activities to State with lower energy costs in order to escape the high prices and the possible loss of turnover that may result thereof. This could have several negative effects such as loss of employment in Germany as well as increase of greenhouse gas emissions globally (countries with lower costs usually have lower climate protection standards). Germany had not notified the EEG-Act 2012 to the Commission for ex-ante state aid scrutiny, because it considered that it did not involve state aid. However, the Commission had suspicions that the surcharge introduced by EEG is falling under the scope of Art. 107(1) and therefore it did an ex-post review of the Act. After an in-depth investigation, the Commission concluded that the EEG-surcharge is indeed state aid. The Commission’s reasoning is that by granting reductions to energy-intensive companies, the decision who should pay that surcharge is actually of the State.26
The Commission considered that it is wrong to assume that State control over the resources is exercised only when there are money flows through the State budget. It argued that an exercise of control could be also established if the States regulates what is to happen in case of a deficit or a surplus in the EEG account.27 However this wasn’t fatal for the scheme. The Commission has anyway confirmed that the surcharge reductions for energy-intensive companies under the EEG 2012 were for the major part compatible with the new Environmental and Energy Aid Guidelines, which provide a framework to grant energy-intensive companies reductions from the funding of support for renewable energy. The guidelines allow Member States to apply such reductions to EU energy intensive sectors.28
However Germany was anyway not happy with the decision that EEG-surcharge constitutes “State Aid” regardless of the fact that it was allowed, because by taking this approach the Commission secured itself the right to supervise any changes Germany intends to make to the two mechanisms under Art. 108(2) TFEU. The german state argued that regulation and supervision of flows of private money alone could not constitute State aid. But the Commission reply was that “it is settled case-law that funds financed through compulsory
charges imposed by the legislation of a Member State, managed and apportioned in accordance with the provisions of that legislation, must be regarded as State resources within the meaning of Article 107(1) of the Treaty even if they are managed by entities separate from the public authorities….It is irrelevant whether the entity administering the State resources is private or public.” 29 This obvious difference in the Commission’s and
26 European Network of Environmental Law Organizations 2014. pp.15-24. 27 C(2014) 8786 final, paragraph 126.
28
European Commission :Press release 2014.
11
Germany’s interpretation of the law caused controversy and raised once again the question of what exactly constitutes “State Aid”? In order to clarify this “fundamental legal question” Germany has issued a complaint against the Commission’s decision. Theenergy ministry said that this lawsuit was important in order to clarify the notion of State Aid, because the uncertainty on this matter could also affect future versions of the renewables legislation.30 The present author considers that such clarification is extremely important, because it will provide legal certainty to Member States when drafting future legislation and increase investors’ confidence. However, such problem would be non-existent in a harmonized legal environment. A harmonized support scheme applicable EU-wide would be pre-approved by the Commission and the whole lengthy notification procedure wouldn’t be necessary. This will improve the legal certainty and put EU on a fast track towards reaching it’s climate change commitments.
Unfortunately, the problems do not stop here. The current legal framework also gives pre-conditions for the foreclosure of the market by favouring environmental objectives over EU’s economic and competition objectives. Although, this might have been the necessary approach at the time when the 2020 framework was drafted, the status quo cannot be kept in the 2030 legal framework, because this would be vastly inconsistent with the internal energy market goal, which is at the centre of the Energy strategy.
2.3.Closed market: Aland Vindkraft AB v Energimyndigheten
The problem of the current framework is the difficult balance between European Union (EU) law and national subsidy schemes for renewable energy. Until now the analysis focused on the problems of compatibility with the EU state aid law, particularly with a view to green energy subsidy systems in Germany.However, in this chapter the centre of the legal debate will be shifted to the compatibility between national renewable energy schemes and the principle of the free movement of goods. The issue at heart was at the centre of the Ålands Vindkraft case, which will be explained and analysed in the following paragraphs.This is a case that gave rise to controversy in the legal literature and put at stakes the future of the internal energy market.31 The controversy came out by the difference in the opinions of the Advocate General Bot andthe Court of Justice of the European Union. In contradction to the arguments advanced by Advocate General Bot, the CJEUhas justified the restriction on trade
30 Radowitz 2015.
12
between MS in the area of green energy using environmental protection as an objective justification.32 This Chapter will analyze the judgment in order to identify the impact that it will have on the future of renewable energy in Europe and show why, in light of the internal energy market goal and the 2030 programme, the present legal framework has to be revised.
2.3.1. Background of the case
In order to satisfy it’s 2020 target for consumption of green energy Sweden developed a national support scheme providing for the award of tradable green certificates for installations producing electricity from renewable energy. The scheme operated in the following way: the Swedish government granted certificates to green electricity producers based in Sweden, subsequently those producers can sell the certificates to suppliers or consumers based on the free market principle. At the end of the year, those certificates serve as prove before the government for the suppliers that they have satisfied the quota requirements. Fine was imposed on those suppliers, who did not complete the quota. The scheme was developed based on Directive 2009/28/EC.This Directive established a common framework for the use of energy from renewable sources in order to limit greenhouse gas emissions and it was shaped by the desire to preserve national sovereignty over subsidy systems. The Directive talks of Member States having ‘different renewable energy potentials’ as well as the need for ‘Member States [to] control the effect and costs of their national support schemes according
to their different potentials’. 33 The wording of the Directive without doubt allowed Member States to develop national support schemes. The Directive does not imply any obligation on Member States to open those schemes to foreign producers. On this basis, Sweden denied to its domestic scheme to the Finish operator Aland Vindkraft. Aland Vindkraft started proceeding in the Swedish courts, which subsequently referred the case to CJEU for a preliminary ruling on the interpretation of Directive 2009/28/EC on the promotion of the use of energy from renewable sources and of Article 34 of the Treaty on the Functioning of the European Union (TFEU). The case raised the question of whether national support schemes can discriminate against producers from other Member States and if so whether such discrimination could be justified under the Treaties. The following preliminary questions were submitted to CJEU: (i) whether point (k) of the second paragraph of Article 2 and Article 3 of the Renewable Energy Directive do indeed allow national Member States to shut
32 Case C-573/12 Ålands Vindkraft AB v Energimyndigheten pra 93-110. 33
13
out foreign suppliers; (ii) whether this is a form of discrimination as defined by Article 34 of the EU Treaty and (iii) whether such discrimination could be justified. 34
2.3.2. The legal analysis of the case: CJEU’s juggling with facts and doctrines.
The Court first reviewed the Swedish support scheme in the light of Art.3 of the Renewable Energy Directive and given the wording of the Article, it unsurprisingly established that the measure is fully compatible with the Directive.35 However, the Court did not stop here and proceeded with interpretation of the compatibility of the measure within the meaning of Art. 34 TFEU.36 Review under treaty law was possible, because the Court has observed that the Directive was based on the presumption that MS apply different support schemes and it’s aim was to ensure the proper functioning of those schemes, not to harmonize them. Therefore, it did not imply exhaustive harmonization and there was an open door for the application of EU treaty law. It was important that this point is clarified, because it is CJEU’s consistent case law that national measures that relate to matters exhaustively harmonized at EU level must be assessed in the light of the provisions of that harmonising measure and not in the light of primary law.37 Taking this approach on the matter was particularly important for the outcome of the case, because if the Court would have limited itself only to the interpretation of the measure in the light of the Directive, the Court wouldn’t be able to proceed further with the substantive analysis under EU primary law. In the assessment under Art. 34 TFEU the Court admitted that “legislation such as that at issue in the main proceedings is capable of
impeding imports of electricity, especially green electricity, from other Member States and that, in consequence, it constitutes a measure having equivalent effect to quantitative restrictions on imports, in principle incompatible with the obligations under EU law resulting from Article 34 TFEU, unless that legislation can be objectively justified”.38 The Court’s finding that the measure is discriminatory and contrary to EU law did not cause legal controversy considering the fact that the measure at hand was based on territorial limitations. However, the focal question of the case was not whether the measure is discriminatory, but whether it can be justified. That is where the opinions diverge.
First of all, the justification grounds chosen by the CJEU caused a fierce legal debate. In the general European legal framework measures having equivalent effect to quantitive
34 Durand & Keay 2014, pp. 2-5.
35 Case C-573/12 Ålands Vindkraft AB v Energimyndigheten; par. 54. 36 Ibid, par. 57-62.
37
Ibid, par. 56 38 Ibid, par. 75.
14
restrictions are forbidden. Such measures could be distinctly and indistinctly applicable. Distinctly Applicable Measures are measures the State applies exclusively to imports or exports. Thus, domestic and foreign products are treated differently by law. Indistinctly Applicable Measures apply to both imports and exports. However, it could happen that although the law treats equally both domestic and foreign products, it may lead to different effects for the domestic or foreign product, thus indirectly discriminating it.39 An exhaustive list of the justification grounds for distinctly applicable measures is provided by Art. 36 TFEU. However, taking into account that indistinctly applicable measures can still lead to discrimination in fact, the Court has established, by virtue of case law, that such measures can be justified by “mandatory requirements”.40“Environmental protection” one of the overriding mandatory requirements that could justify the existence of indistinctly applicable measures.41 Considering this established legal framework, it was surprising that in Ålands Vindkraft AB CJEU referred to environmental protection as a justification ground for
the Swedish scheme that was quite obviously distinctly applicable. However, this was not a precedent and this implicit reversal of the Cassis de Dijon principle (only infringements that are not directly discriminatory can be based on the court-invented “mandatory requirements”) happened already before in the case of PreussenElektra. In this respect, his opinion in the Essent case, The Advocate General Bot advised the Court to make this reversal explicit and restore the legal certainty on the matter. However, the Court first ruled on the case of Ålands Vindkraft AB and undermining the Advocate General’s advice confirmed the reversal, however again implicitly.42
This serie of decisions and the lack of explanation by the CJEU, raised some important legal concerns. The question that stands out is whether the Casis de Dijon principle has now been dropped for all „mandatory requirements” or is it so only when environmental protection is at stake?43
39 Craig & de Burca 2011, p. 659.
40 Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein. 41 Case C-2/90 Commission v. Belgium [1992] ECR I -4431.
42
Calster 2014; ‘Climate Change and Renewable Energy as a Super Trump for EU Trade Law’ p. 65.
15 2.3.3. Proportionality: Law vs. Politics.
However, the controversial legal choices of the Court did not stop here. They continued in the CJEU’s assessment of the proportionality of the measure. The principle of proportionality is one of the most fundamental principles of EU law and it is indistinct part of the justification assessment. In order to be justified, a measure has to be proportionate to the objective which is pursued. On this matter, the opinions of the Advocate General and the Court differed again. AG Bot was of the opinion that the national restriction was not a proportionate measure to protect the effects on national environmental protection.44 However, the CJEU constituted the measure as being proportionate to the pursued objective. The Court outlined three reasons for it’s decisions, but without giving detailed explanation. It first pointed out that the determination of the origin of electricity would be difficult in case of cross-border supply of energy from RES. According to the Court the origin of the electricity cannot be determined anymore once it enters the transmission network. Furthermore, the Court considered that the current EU legal framework does not provide with a sufficient tool for proper RES verification. Therefore, the Court suggested that the territorial limitations imposed by the scheme could be proportionate to the MS’s legitimate interest to guarantee the origin of electricity. The Court’s final reason was that the States must be able to control the costs of the support schemes in order to be able to maintain investor’s interest and to protect consumers. It simply reviewed the legislation and stated that “the fact that the national legislation at
issue in the main proceedings does not prohibit producers of green electricity from selling to traders under the quota obligation both the electricity and the certificates does not mean that the legislation goes beyond what is necessary to attain the objective of increasing the production of green electricity. The fact that such a possibility remains open appears to be an additional incentive for producers to increase their production of green electricity.”45 At this point the judgment went in a direction that led to an unfortunate outcome for the completion of internal energy market. The proportionality assessment was vague and based simply on observations of the Swedish legislation and specific market characteristics. The Court of Justice was simply describing the legal and economic situation in Sweden rather than giving reasons. This judgment left a number of unresolved legal questions and has failed to clarify if and when discrimination against foreign goods can be justified on environmental protection grounds.This decision granted to Member States broad margin to make their own assessment
44 Opinion Of Advocate General Bot delivered on 28 January 2014 Case C-573/12 Ålands Vindkraft AB v
Energimyndigheten; par. 92-100,
16
of the proportionality of a measure. All in all, the decision was a win for all renewable energy providers; however, the goal of creating a single European market for electricity was harshly smashed.46
2.4. The implications of the judgment for the future of RES in Europe
Although, the Alands Vindkraft judgment completely contradicted with the Commission’s goal to create an Internal Energy Market, in March 2015, the Commission announced it’s ambitious Energy Union plan. This plan came in the same time as EU is negotiating an international protocol for combating climate change under which it will commit to reduce emissions by at least 40% until 2030. The targets can be reached only through support schemes, because although EU expects that green energy to be fully compatible by 2030 this is not the case yet.47 Pursuing a Single Energy Market and fulfilling it’s global climate change commitments are one of EU’s top priorities at the present moment. In order to achieve them EU is currently creating a legislative roadmap that foresees adoption of new legislation in 2017. In this respect Alands Vindkraft was a strong wake up call for the Commission.48 The Commission became aware that under the current state of law it cannot have it both ways. In the Aland Vindkraft case Member States were backed by the CJEU in their reluctance to open the market for green energy. Therefore, the current RED should be fundamentally revised and the upcoming legislation needs to be drafted in a manner that will avoid future “Aland Vindkraft” like judgments.
This case was used as an example which clearly presents another downfall of the legal framework under which the renewable energy market is currently developing. Considering the fact that the judgment is based on the presently operating Directive, it becomes clear that the framework allows foreclosure of the market. However, despite those problems and misbalances it has to be acknowledged that this framework gave results and the energy efficiency targets were reached to a great extent. These years were crucial for the boost of green energy production and putting the sustainability goal over competitiveness and market integration was probably the right approach at the time. Nevertheless, now new objectives are on the table. That is why the next chapter will explain the new objectives and why the current framework is inconsistent with them.
46 Steinback 2015, p.1
47
European Commission Press Release, February 2015.
17 III
The New Objectives
3.1.International Agreement on Climate Change, Paris 2015.
At the moment this thesis is being written climate change is the hot topic on the World’s agenda. The international community is working hard towards reaching International Agreement on Climate Change in December 2015. In June 2015 a round of negotiations was held in Bonn at the United Nations Climate Conference where the options of limiting the global temperature increase to 2 degrees Celsius were discussed. That upper limit is considered to be the threshold to "dangerous climate change."49 At the same time, a G7 Summit was held where climate change was a central point of the discussions. During the G7 summit all countries affirmed once again their commitment to adopt binding and ambitious agreement at the global climate change summit in December.50 Preventing dangerous climate change is a key priority for the European Union. It has always been a world leader in the fight against climate change and once again it is taking the lead into securing a global, legally binding climate change agreement to be implemented from 2020.51 The agreement that will take a form of a Protocol is hoped to contain fair commitments from all countries to cut greenhouse gas emissions. The agreement must put the world on track to reduce global emissions by at least 60 % below 2010 levels by 2050.52 The vision for the new deal is laid down in a Commission’s Communication paper, which confirms the commitment to cut domestic emissions by at least 40 %, compared to 1990 levels, by 2030 and to least 80 % by 2050.53
3.2.The Commitments.
In the course of the preliminary negotiations on the climate change agreement that, the international community has decided that all parties should submit Intended Nationally Determined Contributions (INDCs). The INDCs are part of the new vision and the aim is to
49
Geden, s.d.
50 European Council: Press Release 2014. 51Boydell 2009, pp. 49-53.
52 Environment for Europeans Magazine, May 2015. 53
18
clarify each countries’ position and readiness to move toward a low-carbon economy.54 The EU’s was one of the first parties to submit it’s INDC. In the submitted document EU makes commitment to reduce emissions by at least 40 per cent by 2030 compared to 1990 levels. This builds upon the agreement reached by EU Heads of States in October 2014 on the EU’s 2030 climate and energy framework (the 2030 Framework). During the European Council meeting held in this regard, the Head of States agreed to put the 2030 Framework back on the agenda after the Paris Conference. Thus a successful outcome of the Paris conference is highly important for ensuring that the EU 2030 Framework will be legislated effectively. Failure in Paris could pose a significant challenge to the domestic implementation of the Framework. 55
3.3. Towards Energy Union
Although sustainability remains priority, the European Union made it clear that it doesn’t plan to undermine it’s goal to create internal energy market anymore in the name of RES development and it is going to look for ways to find a balance. Thus, in parallel to the Paris negotiations, the European Commission has released another major and ambitious project: the Energy Union. Reaching full integration of the EU’s energy market is one of Junker’s Commission top priorities. In the Commission’s opinion security of energy supply, competitiveness and sustainability are the main objectives on which the Energy Union should be based, so that Europe “move[s] away from an economy driven by fossil fuels, an economy where energy is based on a centralized, supply-side approach and which relies on old technologies and outdated business models.” In order to achieve this the European
Commision proposed an Energy Union Strategy with a comprehensive action plan. The strategy with it’s long list of initiatives has been presented as “the most ambitious European energy project since the Coal and Steel Community”56. The Energy Union Strategy consists of five core objectives that are: (i)Secure supplies; (ii) Internal energy market; (iii)Energy
efficiency; (iv)Emissions reduction and (v)Research and innovation in energy.57 Fighting climate change and reaching its full renewable energy potential are EU’s core energy policy objectives. Those objectives could be reached only through integrating the market by
54 Dröge, Spencer et al. 2015. Pp. 7-10. 55 Ibid.
56 Renewable Energy Focus 2015.
19
removing regulatory and technical barriers. For this aim EU needs a comprehensive legal framework to implement its 2030 targets and achieve an Energy Union.58
IV
The Future Legal Framework for RES in Europe: What would be the best design options?
4.1.The Legislative Roadmap for the implementation of 2030 Strategy.
So far the analysis has been focused on the question why the current framework has to be changed in light of the internal energy market goal and the EU’s international climate change commitments. However, a crucial question that remains is how and when the new European energy legislation is going to be designed and implemented. That is indeed what is going to be discussed in the remaining part of the thesis.
After the coming into force of the Lisbon treaty, energy became a so-called shared competence. For the first time, the Treaty defined the different categories of the EU's competences and listed the respective areas for each type of competence. In policy areas where the Community already had competences, the Treaty only provided a codification of the situation. For example, it codified the EU’s competence in environmental policy, which remains a shared responsibility and it explicitly added energy as a shared competence.59This means that both the EU and Member States are authorised to adopt binding acts in the energy and environmental policy. However, Member States may exercise their competence only in so far as the EU did not act on the matter.60 This allowed the Union to introduce legislation that can harmonise the functioning of the energy market, enhance the security of energy supplies, promote energy saving and the development of new and renewable forms of energy.61 Nevertheless, each Member State maintains it’s right to ‘determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply’.62 In this respect, when the Commission introduced the new energy strategy it also reaffirmed that “the right of member states to decide on their own energy mix is respected”. Several measures have already been taken that in some way limit
58 Dröge, Spencer et al. 2015 #2 59 Client Earth 2010, pp. 4-6. 60 EuroLex 2010.
61
Robert Schuman Foundation website: Factsheet 5.
20
the Member State’s choice of energy sources.63 The 2020 renewable energy binding targets have already put some conditionality on the MS’s energy mix
.
64This creates discontent and tension among Member States. That is why finding an appropriate balance between the flexibility granted to Member States in determining their energy mix and providing a legal framework that will ensure sufficient progress on the 2030 targets is crucial for the success of the Strategy.
With a view of implementation of the Energy Union Strategy the Commission outlined it’s action plan and legislative roadmap in the field for the following years. The Commission made it clear that the full implementation by all Member States of the 3rd Internal Energy Market Package is necessary pre-condition for the further development and integration of the market. As a part of the new market design energy efficiency must be “fundamentally rethought” says the Commission.65 It plans to review all relevant energy efficiency legislation in 2016 and propose amendments where necessary. Furthermore, the Commission plans to propose a new Renewable Energy Package in 2016-2017 that will include a proposal for a new Renewable Energy Directive for 2030. Driving more cooperation between Member States and among RES support schemes would be one of the top priorities that the Commission will keep in mind while drafting the proposals. Also a revision of the state aid guidelines for energy and environment is planned for the period between 2017 and 2019.66
4.2.The new legal framework.
Until this point the regulatory framework under which the green energy market is operating was explained and the problems surrounding it were pointed out. The thesis also looked into the new goals for the future of the green energy market. By taking all of this into consideration, the last chapter of the thesis will focus on the question of how should the new legislative framework be drafted in order to avoid the current downfalls and promote green energy in the most efficient way keeping the IEM goal at mind?
The types and the nature of the new targets as well as the structure and the form in which they will implement are fundamental issues on which the execution of the 2030 framework depends. The European Commission has to make crucial policy choices before it proceeds
63 Teffer 2015. 64 Ibid. 65 COM/2014/015 final. 66 Energy Post 2015.
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with legislating. Although the existing framework achieved the aimed results, some stakeholders argue that in a long term the existing targets and policies are not cost efficient and coherent. Another argument is that the current framework does not take the maturity of technologies and competitiveness into account.67 The target is at least 27% use of renewable energy in the total energy mix. There was a discussion with regard to whether this target should be binding at national or EU-wide level. However, some Member States such as the United Kingdom fiercely opposed to the suggestions to make the targets binding on national level.68 The rationale behind their position is that it is more cost-efficient if there is overall binding target that is reached by combined national efforts. That will allow a certain degree of flexibility while the principle of subsidiary will be respected. The Commission has agreed with those arguments and the status quo on this matter will be kept. Thus, the 2030 target will be set on an EU-wide level. The target will be reached through the collective efforts and commitments of the Member States. However, the Member States won’t be prevented from setting domestic, more ambitious targets under the condition that the state aid rules are not violated.69 The market barriers and the different policy goals will have to be addressed by a combination of different legal and policy instruments. These instruments will interact with one another in order to overcome the lack of consistency between the policies and improve the cost-efficiency of the various measures. It is also fundamentally important that the national measures do not lead to market fragmentation, because this will undermine the whole idea behind the Energy Union strategy. There should be a balance between the Union’s competitiveness and sustainability goals.70 Furthermore, the Commission has to make a more detailed assessment of the current balance between national level and EU level instruments in order to decide whether the 2030 framework should be similar to the 2020 framework or whether alternative approaches are necessary.71
The 2020 framework gave to the Member States a larger margin for manoeuvre when transposing the EU legislation for renewable energy into their domestic law. As a result the approaches for renewable support schemes differ from Member State to Member State. This fragmentised the market for renewable energy and precluded it’s integration.72 As it became clear from the CJEU’s judgment in the Aland Vindkraft case, Member States are not obliged
67
COM/2013/0169.
68 Jacobsen & Crisp 2014.
69 European Council Conclusions on 2030 Climate and Energy Policy, 23 October 2014. 70 COM/2013/0169.
71
Ibid.
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to let producers from other MS to their national support schemes. This outcome of the judgment came as a big disappointment to the Commission and it’s market integration ambitions, because the ruling of CJEU impeded the opening of the green energy market in Europe. However, the Court ruled that national governments are not obliged to let foreign producers to their national support schemes and justified the fragmentation of the market with environmental protection arguments.73 The Court came to these conclusions basing it’s argumentation on the existing legal framework. This means that under the current regime the integration objective cannot be reached. It follows from this that if the Commission wants to achieve integration, the 2030 framework must be designed differently. Following those observations a fundamental question that comes in mind is: When approaching the 2030 framework how could the EU design a legal model where it’s sustainability objective is balanced with the need for a fully liberalised and integrated energy market?74 The remaining part of this thesis will be dedicated to analysing and answering this question.
4.2.1. The possibility for a common European support scheme.
Harmonization is an option that is worth being discussed for the design of the upcoming legal framework. Having a common European support scheme could remedy the State aid compliance problem and create a fully integrated market by removing regulatory barriers. Furthermore, in an integrated market there would be more competition among MSs to attract RES-plants which are financed via an EU-wide support mechanism. This possibility would give the opportunity to Member States that performed poorly to streamline their procedures to incent investments and remove administrative barriers, which will boost the development of renewable energy.75
This possibility has been a topic of discussion in Brussels already when the 2020 framework was designed. The Commission has analyzed the effects that such hypothetical transition would have and presented some strong arguments pro harmonization. One of the main arguments of Member States and stakeholders is that feed-in tariffs that are currently one of the most applied support measures would be very difficult to form and regulate on a community level. Under feed-in tariffs producers receive a fixed price per kWh of electricity they produce independently of the market price.76 For the formation of this priceinformation on technologies and costs is required in order to tariff as cost-effective as possible.However,
73 Beckman 2014.
74 COM/2013/0169. 75
Waldner s.d.
23
in its analysis the Commission did not see any obvious reason why this information can be obtained more efficiently if collected by Member States rather than in a coordinated way on a European level. Furthermore, the competition among Member States to attract RES-producers under a harmonized system could give them an incentive to “remove barriers to large scale renewable energy development”.77 On the other hand it also recognized that a harmonized feed-in tariff system may be more inflexible and expensive, if the information is not managed correctly on a EU-wide basis. However, the Commission’s conclusion was that most of the potential difficulties arising out of a harmonization could be overcome if there is strong political will to do so.78 However, what was really the problem then was the major absence of political willingness to present a harmonized European system. The Commission realized as a key obstacle for harmonization the fact that “MSs that become importers of
RES-E in a harmonized system may not be willing to pay the bill if they do not profit from the local beneficial effects […] which would be achieved if the renewable energies were produced in their territory”.79 Thus, at the time Directive 2009/28/EC Member States were
not ready to take such step and discussions for harmonization of support schemes were left out of the agenda.
However, since the introduction of the Energy Union Strategy the discussions have been renewed. The European Commission noted in a January 2011 Communication that harmonisation could rather be a long-term goal: “A convergence of financing, such as feed-in tariffs, will be necessary in the medium or long term, when a truly European market is created….This can include greater cooperation in setting tariffs, technology bands, tariff lifetimes, etc." The Commission continued by declaring that convergence could also include
completely harmonizing the support schemes.80 Therefore, the possibility for harmonization and strategies for it’s introduction are back on the Commission’s agenda in light of the consultation talks for the draft of legislation for the implementation the EU’s energy strategy and climate change commitments. Harmonizing the support schemes for RES would mean a top-down implementation of common, binding provisions. However there are many possibilities on how the support schemes could be harmonized and to what extent. There could be full harmonization, which is the long-term goal of the Commission. For a full
77 SEC(2008) 85. 78 Ibid. 79 Summary COM(2005) 627. 80 MEMO/11/54.
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harmonisation to take place an EU-wide targets (no MS targets) and EU-wide support scheme would have to be set up. This will require harmonisation of the framework conditions and the design of the elements of the selected support scheme and it will significantly limit role of the MS. Most importantly, full harmonisation of the support schemes implies a fully harmonised legal regulatory framework. It remains unclear whether the market is ready for such step and while full harmonisation remains a long term aspiration, lower degrees of harmonisation are also possible and should be considered. If the market is considered to be too immature for full harmonization, another option for the design of the 2030 framework could be a medium harmonisation. In case of medium harmonization there would also be one EU-wide instrument and EU support level, but the Member States will be allowed to provide additional support for specific technologies. There is also a scenario of soft harmonisation, which is actually the model by which the current system is designed. There is an EU-wide target, but also national targets consistent with the EU target. However it is up to the Member States what design of the support schemes they deem best and support levels differ across countries.81 Soft harmonization doesn’t do much for the integration of the market, but when harmonization of the support schemes was considered in light of the preparatory work for the 2020 framework the Commission decided that having competing national support scheme could be healthy for the market at least over a transitional period until some experience is gained. 82 This would lead to more solutions and the competition would show which type of schemes are most beneficial and cost-efficient. At the time the 2020 framework was being modelled the Commission considered that it was too early to decide which type of support scheme is more advantageous. Therefore, the Commission did not regard it appropriate to present at harmonised European system at that stage.83 However, since then the technologies have matured and the market has gained experience. Moreover, with the introduction of the Energy Union strategy the integration of the energy market has become EU’s top priorities. Clearly, the circumstances have changed and harmonization would be a suitable option to meet the 2030 targets. The Commission has not yet introduced any legislative proposals on the matter. It plans to do so in 2017. 84 The Commission has also not given any signs as to whether it will opt for harmonization and which approach of harmonization it would take. Yet, it made it clear that it will aim for full market integration and this seems to be impossible to happen without full harmonization. However, the Commission’s task is not as simple as
81 Del Rio et al. 2012,pp. 9-10. 82 COM/2005/0627.
83
Ibid.
25
just deciding what level of harmonization to introduce. If it decides to opt for full harmonization of the support schemes, there are many issues that have to be taken into account and resolved. These issues will be presented and discussed in the following paragraphs of this thesis.
4.2.2. Harmonization issues
The first thing that has to be carefully considered by the European legislator before introducing a harmonizing piece of legislation in the energy sector is what would be the legal basis for the adoption of such act. Secondly, the legislative procedure that will be used for it’s adoption must be chosen very carefully. There are two kinds of procedures that can be used for the adoption of EU legislative acts: ordinary and special legislative procedures. When an act is being adopted through the ordinary legislative procedure, the Parliament and the Council act as co-legislators. They can adopt the act either at first or at second reading and the voting rule that applied is qualified majority voting (QMV).85 When Qualified Majority Voting is applied each member state representative has a certain number of votes, as set out in the Treaty. The weighting of votes roughly reflects the size of population of each member state.86 Qualified Majority voting is used in order to avoid deadlock situations in the legislative process and make the decision-making easier, because it allows for a decisions to be taken even without the consent of one or more Member States. When qualified Majority Voting procedure is applied, a majority is reached and an act can be adopted, if (i) 55% of member states vote in favour (which means in practice 16 out of 28) and (ii) the proposal is supported by member states representing at least 65% of the total EU population.87 This voting mechanism is used in the ordinary legislative procedure where issues that are sensitive matter for the MS are not on the agenda. For matters that are of high national interest to MS, special legislative procedures are used where decisions are taken with unanimity by the Council of the European Union.88 This difference in the decision making process makes the legislative procedure that will be used crucial for the success of eventual harmonization. Energy is a sensitive topic for the Member States and if special legislative procedure is used for the adoption of harmonizing piece of legislation in this area, it is doubtful that unanimity will be reached. Therefore, a crucial factor for the final outcome is the legislative basis and respectively the legislative procedure that would be applied to a hypothetical legislative act
85 Craig & de Burca, pp. 129-132. 86 Ibid.
87
Ibid.
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for the harmonizing the support schemes. In this regard, a legislative basis in the area of green energy could be found in two TFEU Articles. It is fundamentally important to make a detailed assessment of both and identify the most appropriate one to be used as legislative basis for harmonization of support schemes since the two articles provide for different legislative procedures.89
On one hand, the Article that could be used as a legal basis for harmonization of support schemes is Article 192(2)(c) TFEU.90 It is not very clear when the special legislative procedure applied for the adoption of measures that may have effect on a State’s energy sources and supply. That is why there are differing views concerning the scope of application of Article 192(2)(c) TFEU. The Article requires the measures to be “significantly affecting a Member State's choice”, which indicates that only those measures that have an essential effect on the basic structure of energy supply or choice between the different sources fall under it’s scope.91 The assessment of a significant effect is left to the discretion of the EU institutions and Article 192(2)(c) TFEU has to be applied as soon as even one Member State is considered as significantly affected.92 Furthermore, this “significant effect” has to be cumulative on the choice between the different energy sources and on the general structure of its energy supply. Thus, where a legislative act that aims at fully harmonizing the support schemes is to be adopted, it is likely that Article 192 (2) (c) will be applicable.93 So, if Article 192 TFEU is used as a legal basis for a measure harmonizing the support schemes, such measure could only be adopted by “ the Council acting unanimously in accordance with a special legislative procedure”. On the other hand, the Lisbon Treaty has introduced an explicit energy competence for EU in the field of energy by means of Article 194 TFEU. The explicity of this provision gives it a lex specialis prevail over other provision and as a result makes it the most obvious legal basis for the adoption any kind of energy-related measure.94 The objectives and the scope of action of EU in the area of energy are given by Article 194(1): “In the context of the establishment and functioning of the internal market and with
regard for the need to preserve and improve the environment, Union policy on energy shall aim, in a spirit of solidarity between Member States, to:(a) ensure the functioning of the energy market; (b) ensure security of energy supply in the Union; (c) promote energy
89
Del Rio et al. 2012.
90 Fouquet et al. 2012,p.15 91Ibid. pp.11-19. 92 Ibid 93 Ibid. 94 Fouquet et al. 2012, pp.11-19.
27
efficiency and energy saving and the development of new and renewable forms of energy; and (d) promote the interconnection of energy networks. Legal acts that pursue those objectives
can be adopted on the basis of Article 194(2)(1) TFEU applying the ordinary legislative procedure. All binding and non-binding instruments mentioned in Article 288 TFEU can be used to adopt measures under Article 194(2)(1). However, the EU’s competence and powers to legislate in the energy field are restricted by Article 194(2)(2), which reserves to Member States “the right to determine the conditions for exploiting its energy resources, its choice
between different energy sources and the general structure of its energy supply.” This
provision and it’s impact are subject to a heated legal debate. There are few disagreements among the legal community regarding the interpretation of the Article. Article 194(2)(2) TFEU doesn’t provide for special decision-making procedure, which has led some legal scholars to the conclusion that the clause is giving exclusive competence of the Member States to adopt legislation in the areas mentioned and it serves as an absolute limit of EU competence.95 Hence, if the provision is interpreted as absolutely limiting the competence of the EU and leaving the Member States with an exclusive competence then it would not be possible to base a legislative act harmonizing the support schemes on Article 194, because it will clearly fall within the hypothesis of paragraph 2. Nevertheless, an adoption of a measure in the area of green energy could also be adopted on the basis of Article 192 (2)(c), but this will require unanimity in the Council. 96 From this it follows that, if full harmonization of support schemes is to be pursued, a full dedication and commitment by all 28 Member States would be essential. However, it is highly unlikely that Member States would agree to such measure, if they do not consider it necessary at this stage of development. For this reason, before we jump to recommendations for the design of a scheme, the next section will consider the views of stakeholders on the issue. It is important to see what the Member States and stakeholders think about this, because in the end they are the ones that will influence the decision.
In this respect, the Council of European Energy Regulators (CEER) researched what is the opinion of stakeholders about harmonisation. Key factors considered in the assessment were the implications of different balancing regimes, permitting processes, differences in market engagement rules, administrative burdens, non-harmonisation of energy costs and dual positions on existing subsidies and coordination challenges.97 The EU energy strategy, the
95 German Advisory Council on the Environment 2011, p. 179. 96
Fouquet et al. 2012, pp.11-19.
28
development of an internal market, the effects of the economic recession and the EU‟s Emissions Trading Scheme (EU ETS) carbon price on RES deployment were also factors considered in the assessment. After taking into account all of those factors and analysing the stakeholder’s opinions CEER concluded that support scheme stability is necessary and harmonisation of support schemes is possible in the long-term without having negative effect on investor confidence. However, the CEER also recognized the importance of the different schemes. It acknowledged that the market is not mature enough and the different approaches encourage the development of more mature technologies and help, by means of comparison among the schemes, to recognize the best practices. Collecting such practical evidence will allow on it’s turn individual States to tailor support schemes to achieve maximum benefits. Many stakeholders argued against a move towards greater harmonisation on the basis that it might result in an inefficient compromise between existing schemes. Such an inefficient allocation of RES investment would make the transition to a low carbon energy supply more expensive, which will unnecessarily increase costs for the consumers. On the other hand, continued non-harmonization and the lack of competition that arises thereof due to the closed nature of the green energy market leads to cost inefficiencies. Harmonisation would let an efficient allocation of resources, because investors could allocate production to areas with the best available and most cost efficient resources. This will lower the costs of production and thus decrease the price for final consumers in the long-run, while a non-harmonised system would increase the social cost of a transition to a low carbon Europe. 98 This divide in viewpoints makes it is very unlikely that a decision for a full harmonization of support schemes could be taken with unanimity. In this respect the Centre of European Energy Regulators points to a possible hybrid regional solution that would be neither wholly harmonised nor wholly Member State based.99 The German Advisory Council on the Environment (SRU) expressed similar views in it’s contribution to the consultation of the European Commission on the Green Paper “A 2030 Framework for Climate and Energy Policies”.100 The German Advisory Council acknowledges that the differing national support schemes are inconsistent with the objective of a liberalized internal energy market. A fully harmonized European-wide support system would be more consistent with the internal energy market goal, but there are some fundamental obstacles to achieving a fully
98 Ibid.
99
Council of European Energy Regulators 2012, pp.15-30.
