Introduction
In the Judgment in Case C-558/22 Fallimento Esperia and GSE on 7 March 2024, the Court of Justice revisited the landmark cases Essent Belgium (Judgment of 29 September 2016, C‑492/14, EU:C:2016:732, and Judgement 11 September 2014, C-204/12, EU:C:2014:2192) concerning the compatibility of national laws imposing support schemes favoring national renewable energy production. Particularly in this case, the support scheme concerns a mandatory purchase of Italian green certificates in proportion to the quota of energy imported that did not demonstrate the guarantees of origins from renewable source producers.
Legal and Factual Background
The controversy of the present case followed the decision of 28 June 2016 of the Italian energy regulator, ARERA, to issue a fine of approximately EUR 3 million on Esperia SpA for failing to purchase Italian green certificates with respect to the electricity imported into Italy in 2010 and produced using non-renewable sources. Esperia SpA disputed the validity of the fine. The referring court then requested the interpretation of the compatibility of Article 11 of Legislative Decree No 79/1999 with several provisions of EU law, namely the Renewable Energy Directives of 2001 and 2009, Articles 28, 30, 34, and 110 TFEU relating to the free movement of goods, and Articles 107 and 108 TFEU concerning State aid rules.
Before answering the referred question, the judgment dedicates a few paragraphs to preliminary observations to contextualize and explain the complexities of the support scheme established by Italian law, which is indeed necessary to understand the reasoning of the Court. Article 11(1) of Legislative Decree No 79/1999 imposes the obligation on electricity importers and domestic producers from non-renewable sources to feed a quota of renewable sources into the national electricity network. As an alternative, Article 11(3) creates conditions to discharge the same operators from this obligation. Either the electricity importer or producer of non-renewable sources should submit guarantees of origins acquired from other producers of renewable energy sources in other Member States, on the condition these other producers feed energy injected into the Italian electricity grid, or acquired green certificates issued by GSE, an entity controlled by the Italian Ministry of Economic Affairs, to Italian producers of renewable electricity. Green certificates are the Italian denomination given to guarantees of origin issued by GSE. Guarantee of origins are tradable electronic documents issued by Member States to renewable energy producers to prove that a certain volume of energy injected into the grid network is produced through renewable sources. Since these electronic documents are tradable, depending on their market value, they can also be a means to subsidize renewable energy production.
The reasoning of the Court: RED II, State Aid, and Freedoms
As the first step, the Court of Justice interprets the provisions of the Renewable Energy Directives of 2001 and 2009, Directives 2001/77 and 2009/28. For the Court, none of the EU legislations sought to fully harmonize support schemes (paras 46 and 52). Moreover, Articles 3(1) and (2) of both directives must be interpreted as the national support schemes that are appropriate means to achieve national indicative targets for the consumption of renewable energy by 2030 (paras 47 and 54). Therefore, the Renewable Energy Directives do not preclude a national support scheme exclusively favouring the national production of green electricity (para 54) insofar as it is in accordance with the principle of proportionality, being for the referring court to apply the proportionality test (para 56).
As regards the TFEU’s provision invoked, the Court of Justice first assesses whether the measure at issue may come within the scope of Articles 107 and 108 TFEU. Classifying a measure as State aid necessitates fulfilling four conditions: intervention by the State or through State resources, effect on trade between Member States, distortion of competition, and selective advantage. While the effects on trade between the Member States and on competition are evident (para 63), the judgment gives more attention to the classification of the measures as an intervention of the State or through State resources and selective advantage.
The Court of Justice reminds us that to categorize advantages as State aid, they must be granted directly or indirectly through State resources and be attributable to the State (para 67). In this context, the provision of green certificates to national producers and the mechanism ensuring their value are analyzed to determine if they involve State resources. The Court concludes that the support scheme is not only a State intervention introduced by a legislative act (para 69), but also that the aid was indirectly granted by State resources. Although the advantage represented by the awarding of these certificates to national green electricity producers appears to be financed solely by resources from the producers or importers (para 74), Article 11(3) of the Legislative Decree No 79/1999 requires GSE to buy green certificates where they exceed the number required by the operators obliged to purchase them, preventing oversupply of green certification and controlling its price.
However, regarding the last condition for constituting a State aid (selective advantage), the Court argues that the differentiation between undertakings caused through the support scheme ‘results from the nature of the overall structure of the system of which they form part’ (para 91). In other words, ‘the differentiation between producers of green electricity and producers and importers of electricity from non-renewable sources may be justified by the nature and general scheme of the general system regulating the production, marketing, and consumption of electricity in Italy’, ‘taking into account the need to ensure environment protection’ (para 92). Therefore, the Court concludes that Articles 107 and 108 TFEU must be interpreted as not precluding the support scheme mechanism at issue for not fulfilling the condition of selective advantage.
Last, the Court of Justice assesses the compatibility of the national measure at issue with Articles 28, 30, 34, and 110 TFEU relating to the free movement of goods. In the present case, the Court argues the measure at issues constitutes barriers to imports. However, the obligation on importers to purchase Italian green certificates to import their electricity, which is not demonstrated through guarantee of origins, can be justified by the promotion of the production of electricity from renewable energy sources (para 109). It follows from the foregoing that the measure at issue is in accordance with the principle of proportionality. The Court finds that the measure ‘appears appropriate for the purpose of promoting the use of renewable sources with a view to protecting the environment and the health and life of humans and animals and preserving plants’ (para 118). Furthermore, the intervention of the GSE in placing or purchasing green certificates in the event of shortage or oversupply is appropriate to guarantee the well function of the green certificates (ibid.). About the second condition of the proportionality test, the CJEU concludes that the support scheme is necessary for the ‘effectiveness of the system of support national production and the consumption of green electricity’ (para 119).
Conclusions
The Court of Justice’s decision is important because it develops its precedents in Essent Belgium’s saga, where the Court considered national measures that benefitted national renewable producers with free access to the network grid and mandatory purchases of national guarantees of origins as discriminatory and/or disproportional. In the present case, the Court not only had the chance to revisit the proportionality test in an analogous case but also to assess the Italian support scheme against EU State aid law, reaching different conclusions.
Acknowledgment: this case law is part of our seasonal article publication in the European Review of Contract Law. For reference, use the following citation:
