BIOMETHANE CROSS-BORDER TRADE CASE NO. C-549/15 BEFORE THE EUROPEAN COURT OF JUSTICE BERLIN, 17 JUNE 2016 RECHTSANWALT DR. MAX PEIFFER 17 June 2016 Cross-Border Trade Biomethane

BIOMETHANE CROSS-BORDER TRADE 01National Limitations - Restrictions against foreign Biomethane 02Legal Framework of the EU - National Limitations acceptable? 03Case pending before the European Court of Justice: „E.ON Biofor Sverige./. Energimyndigheten“ - Swedish Tax-Relief for Biomethane - Art. 18 RED (Question 1) - Art. 34 TFEU (Question 2) 04„Ålands Vindkraft“ as Precent? - Swedish quota for renewable Electricity - Comparability of the cases? 17 June 2016 Cross-Border Trade Biomethane 2 OVERVIEW

01 NATIONAL LIMITATIONS RESTRICTIONS AGAINST FOREIGN BIOMETHANE  National support schemes are generally restricted to domestic biomethane  Especially: blending obligations and regulations for tax relief  Also: national schemes supporting the generation  Reason: tracebility of renewable energy transported via the gas grid  Biomethane may only be accepted in case of physical import  Cross-border trade not attractive  Example Germany:  EEG-Act 2014 (Renewable Energy Act)  § 47 Abs. 6 EEG-Act 2014: Biomethane must be fed in in Germany  EEWärmeG (Renewable Energy Heat Act)  Sec. II. Nr. 1 c bb Annex to EEWärmeG  BImSchG (Federal Immission Control Act)  Interpretation by the regulative bodies 3 17 June 2016 Cross-Border Trade Biomethane

02 LEGAL FRAMEWORK OF THE EU NATIONAL LIMITATIONS ACCEPTABLE?  Renewable Energy Directive (RED)  No explicit obligation to open national support schemes to renewable energy produced in other Member States (recitals 25, 35 to RED)  Member States may decide to what extent they support green energy produced in other Member States (legal framework: Art. 5 to 11 RED)  Confirmed by recent jurisdiction of the European Court of Justice (Ålands Vindkraft./. Energimyndigheten)  European primary law (TFEU - Treaty on the Functioning of the European Union )  EU-wide single market (“internal market”) be established, Art. 26 (2) TFEU  quantitative restrictions for cross-border trade prohibited, Art. 34 TFEU  Limitations only acceptable on “grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property”, Art. 36 TFEU  National limitations must be acceptable under this standard 4 17 June 2016 I Cross-Border Trade Biomethane

03 CASE BEFORE EUROPEAN COURT OF JUSTICE SWEDISH TAX-RELIEF FOR BIOMETHANE  Request for a preliminary ruling, Rs. C-549/15 (E.ON Biofor Sverige AB./. Energimyndigheten), October 22, 2015: Are the terms ‘mass balance’ and ‘mixture’ in Article 18(1) RED to be interpreted as meaning that the Member States have an obligation to accept trade in biogas between Member States via an interconnected gas network?  Does the „mass balancing“-principle laid down in the RED refer to an international level (European gas grid) or only to a domestic one? If the answer to question 1 is in the negative, in that case is the relevant provision of the directive compatible with Article 34 TFEU, despite the fact that application thereof is likely to have the effect of restricting trade?  If not: Is the regulation of the RED in line with primary EU law? 5 Cross-Border Trade Biomethane 17 June 2016 Question 1: Question 2:

03 CASE BEFORE EUROPEAN COURT OF JUSTICE ART. 18 RED (QUESTION 1) Art. 18 RED: Verification of compliance with the sustainability criteria for biofuels and bioliquids Where biofuels and bioliquids are to be taken into account for the purposes referred to in points (a), (b) and (c) of Article 17 (1), Member States shall require economic operators to show that the sustainability criteria set out in Article 17 (2) to (5) have been fulfilled. For that purpose they shall require economic operators to use a mass balance system which:  allows consignments of raw material or biofuel with differing sustainability characteristics to be mixed;  requires information about the sustainability characteristics and sizes of the consignments referred to in point (a) to remain assigned to the mixture; and  provides for the sum of all consignments withdrawn from the mixture to be described as having the same sustainability characteristics, in the same quantities, as the sum of all consignments added to the mixture.  May the „mixture“ be cross-border? 6 Cross-Border Trade Biomethane 17 June 2016

03 CASE BEFORE EUROPEAN COURT OF JUSTICE ART. 18 RED (QUESTION 1)  How might the Court decide on Question 1? Does the mass-balance as of Art. 18 RED refer to the whole EU? –RED does not oblige Member States to do EU-wide mass balancing. –Member States may freely decide on how they ensure fulfillment of national targets. –Mass balance system designed by Member States may differ/no EU-wide rules exist  Interoperability is not guaranteed –International cooperations of Member States are optional, Recitals 25, 35 to RED, Art RED +European natural gas network constitutes a closed structure, in which consignments are transported cross-border  this may constitute a “mixture” as of Art. 18 RED +Mutual recognition of mass balance systems inherent in Art 18 (4) RED +For the sake of cooperations of Member States “mixture” as of Art. 18 RED refers to an international level +In domestic trade mass balancing is generally admissible  Conclusion: Question 1 will probably be answered in the negative 7 Cross-Border Trade Biomethane 17 June 2016

03 CASE BEFORE EUROPEAN COURT OF JUSTICE ART. 34 TFEU (QUESTION 2)  How might the Court decide on Question 2? Does Art. 34 TFEU require a free trans-national transport of biomethane? + Art: 34 TFEU prohibits quantitative restrictions on imports and all national measures having equivalent effect of hindering, directly or indirectly, actually or potentially, intra-Community trade  restrictions of national support schemes on domestic biomethane may hinder the cross-border trade in the EU. +/– Art. 36 TFEU: Possible justification of infringements on one of the public interest grounds listed (i.e. protection of environment) in accordance with the principle of proportionality  Traceability is generally a suitable reason  If secure traceability may me ensured no reason for limitation  Principle of Proportionality must be observed  the overall goal of emission reduction favors cross-border trade  in domestic transactions mass-balancing via the gas grid is done. There is no general difference to trans-national mass-balancing 8 Cross-Border Trade Biomethane 17 June 2016

04 „ÅLANDS VINDKRAFT“ AS PRECENT? SWEDISH QUOTA FOR RENEWABLE ELECTRICITY  EuGH, Rs. C-573/12 v (Ålands Vindkraft./. Energimyndigheten)  (Swedish) national limitations for renewable energy conforms to EU Law  No obligation to open up support schemes to green electricity produced in other Member States  Barrier to trade justified acc. to Art. 36 TFEU in order to protect the environment, the health and life of humans, animals and plants  Limitation is proportional (i.a. necessary):  Traceability of green electricity via the grid remains difficult (No. 87 and 96)  Guarantees of origin (Art. 15 RED) cannot serve as confirmation that a certain volume of electricity supplied by those networks is precisely the electricity from renewable energy sources in respect of which those guarantees were given (No. 90)  Proper functioning market mechanisms that are capable of enabling traders to obtain certificates effectively and under fair terms (No. 113, 114)  Conclusion: Restriction of the Swedish Electricity Quota Conforms with EU-law 9 Cross-Border Trade Biomethane 17 June 2016

04 „ÅLANDS VINDKRAFT“ AS PRECENT?  Possible barrier for trading in both cases  Art. 34 TFEU  Same reasons for justification, Art. 36 TFEU  Both renewable electricity and biofuels contribute to the reduction of emissions and thus supports environmental protection  Proportionality?  Currently no European-wide mass balance system in place (=no European-wide scheme for tracing renewable electricity) 17 June 2016 Cross-Border Trade Biomethane 10 COMPARABILITY OF THE CASES? DIFFERENCES  Different harmonization levels  Art. 18 RED more specific then electricity obligations  Guarantees of origin vs. mass balance system?  Sustainability criteria ≠ origin of renewable energy  Mass balance = higher verification standard  Mutual recognition of mass balance systems European-wide is inherent in Art 18(4) RED SIMILARITIES

DR. MAX PEIFFER AMALIENSTR.67, MÜNCHEN T F