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Of Markets and Subsidies: Counter-intuitive Trends for Clean Energy Policy in the European Union and the United States

Published online by Cambridge University Press:  07 January 2021

Felix Mormann Open the ORCID record for Felix Mormann [Opens in a new window]
Felix Mormann*
Affiliation:
Texas A&M University School of Law, Texas A&M University College of Engineering, Fort Worth, TX (US).Email: mormann@law.tamu.edu.
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Abstract

The United States (US) is frequently portrayed as a nation with a deep distrust of big government and a strong commitment to markets and competition. In contrast, the prevailing image of the European Union (EU) is that of a highly bureaucratized polity favouring interventionist economic governance over free market capitalism. In the context of clean energy, however, these roles appear to be somewhat reversed. A top-level survey of the US clean energy policy landscape reveals a surprisingly pervasive reliance on government subsidies with few, if any, competitive elements. EU clean energy policy, meanwhile, reflects an unexpected commitment to market-based instruments and competition. This article suggests that these counter-intuitive policy trends can be explained by critical differences in the black-letter law of both jurisdictions and its enforcement in the courts, among other factors. Unlike their American counterparts, EU judges prioritize the timely transition to a low-carbon energy economy over unrestricted competition among Member States. As the EU pushes for greater intrastate competition in clean energy policy, the US focuses instead on defending the Founding Fathers’ ideal of unfettered interstate competition.

Keywords

Energy policyFederalismCommerce clauseState aidComparative lawClimate change
Type
Symposium Article
Information
Transnational Environmental Law , Volume 10 , Issue 2 , July 2021 , pp. 321 - 337
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press.

1. INTRODUCTION

The prevailing view of the United States (US) is that of a nation with a deep distrust of big government and a strong commitment to markets and competition.Footnote 1 Conversely, the European Union (EU) is frequently portrayed as a highly bureaucratized polity committed to equality among its Member States more than a competitive race to the top.Footnote 2 Remarkably, these roles appear to be somewhat reversed in the context of clean energy policy.

On the US side, dozens of proposals for a market-driven national clean energy mandate have been introduced into Congress but none has managed to clear both houses.Footnote 3 Instead, federal policymaking relies primarily on tax incentives and similar subsidy programmes to promote the transition to a clean, low-carbon energy economy.Footnote 4 More than half of the states, meanwhile, have adopted renewable portfolio standards (RPS) designed to create demand and markets for cleaner electricity by requiring electric utilities to source a percentage of their sales from solar, wind, and other renewables.Footnote 5 Notwithstanding the American public's general preference for market mechanisms over subsidy programmes, dormant Commerce Clause jurisprudence has boosted the political appeal of subsidies, even at the state level. After all, states may not craft their RPS policies to discriminate against out-of-state actors by restricting market access for out-of-state firms.Footnote 6 Yet, the US Supreme Court has made clear that states are generally free to use targeted subsidies to favour in-state firms over out-of-state competitors.Footnote 7

The EU, on the other hand, has long relied on union-wide renewable energy mandates, similar to US-style RPS programmes, intended to create demand and markets for emerging clean energy technologies to be populated by competitive forces.Footnote 8 More and more Member States have adopted similar mandates at the national level.Footnote 9 In contrast, subsidies at the EU Member State level are far less prominent than at the US state level, in part because Article 107(1) of the Treaty on the Functioning of the European Union (TFEU)Footnote 10 imposes a general prohibition on state aid to avoid distortions in the EU internal market caused by Member States seeking to promote their domestic industries.

This article proceeds in four sections, including this introductory Section 1. Section 2 offers a stylized account of the prevailing views on the relationship between government and markets in the US before surveying the US clean energy policy landscape and its surprisingly heavy reliance on subsidies over market-based instruments. Section 3 opens with a similar snapshot of European views on the appropriate role for government and markets, followed by a high-level survey of the EU clean energy policy landscape, revealing an unexpected preference for market-based instruments over government subsidies. Section 4 offers concluding thoughts and a future outlook.

Before moving forward, a note of caution is in order. An in-depth analysis of all policies implemented by the multitude of jurisdictions meddling in clean energy on both sides of the Atlantic is beyond the scope of this piece. Instead, I deliberately focus on a sampling of the most prominent policies adopted by top-level policymakers, hoping to draw attention to some counter-intuitive trends that have received scarce, if any, attention in the literature to date. Like any other comparison between the US and the EU, this exercise is, of course, subject to the usual limitations, including critical differences in the degree of integration, approaches to governance, and incorporation of international law into domestic legal systems, to name but a few.

2. UNITED STATES: MARKET RHETORIC AMIDST A WEB OF SUBSIDIES?

Americans tend to view government-run programmes as ineffective, inefficient, and of low quality, all the while praising private, market-based programmes for their efficacy.Footnote 11 This pro-market and anti-government stance has been shaped by two related trends. The American public's trust in its government has been in decline ever since World War II, gradually eroding over the Vietnam War, Watergate, and other similarly controversial events. Recent polling suggests that, as at 2019, only 17% of Americans trust the federal government to ‘do what is right’.Footnote 12 At the same time, free market capitalism is widely credited with driving periods of strong economic growth, prompting the public to embrace markets as the principal engine of prosperity.Footnote 13 In light of these pro-market and anti-government trends, it should come as no surprise that the US ranked first in the World Economic Forum's 2018 Global Competitiveness Index, based on the institutions, policies, and other factors that determine a country's level of productivity.Footnote 14

In the context of clean energy policy, however, pro-market US rhetoric contrasts with the practice of widespread reliance on government-led subsidies in lieu of more market-oriented programmes. This ‘clean energy exceptionalism’Footnote 15 is driven by a variety of factors, including the political economy of climate and clean energy policy at the US federal level, economic parochialism among state policymakers, and the Supreme Court's jurisprudence on the US Constitution's Commerce Clause.

To be clear, there have been plenty of attempts to create a nationwide market that would drive demand for clean energy by requiring electric utilities to source a percentage of their sales from solar, wind, and other renewable sources. Since the 1990s, more than two dozen proposals for such a national RPS programme have been introduced into Congress but none has made it into law.Footnote 16 The 2009 Waxman-Markey billFootnote 17 came closest, passing the house before dying after two readings in the Senate.Footnote 18 The Obama administration's legacy climate and clean energy project – the now-defunct 2015 Clean Power PlanFootnote 19 – would have combined a command-and-control approach imposing specific limits on the carbon intensity of power generation with competitive opportunities by encouraging state policymakers to create markets for emissions allowance trading.Footnote 20 The Trump administration's replacement – the 2019 Affordable Clean Energy Rule – contains no market-based elements and merely prescribes a command-and-control regime that requires (minor) efficiency improvements in coal-fired power plants.Footnote 21

Overall, US clean energy policy, at the federal level, does little to harness the market's competitive forces. Instead, federal policymaking relies primarily on tax breaks to subsidize eligible technologies and projects. Section 45 of the Federal Tax Code, for example, grants wind, biomass, and other clean energy projects production tax credits to reduce their tax bills in proportion to the amount of electricity they feed into the grid.Footnote 22 Sections 25D and 48 of the Tax Code provide for investment tax credits that allow fuel cells, solar, geothermal, and other clean power projects to deduct a portion of qualifying expenditure from their tax bill.Footnote 23 The Tax Code's Modified Accelerated Cost Recovery System (MACRS), meanwhile, enables owners of select clean energy assets to deduct their entire depreciation allowance over a period of only five years, as opposed to the twenty or more years of useful life that these assets actually possess.Footnote 24 These tax breaks may not be the only manifestations of federal policy support for clean energy.Footnote 25 Moreover, many tax credits are in the process of phasing down, with some slated to sunset altogether.Footnote 26 For the time being, however, tax incentives remain the tool of choice for federal policymaking, expected to deliver more than USD 40 billion worth of subsidies to US clean energy projects between 2018 and 2022.Footnote 27 That is a lot of government spending with few competitive elements for a nation that generally favours free market competition over big government.

Competition and market-oriented policies have fared somewhat better at the US state level. Twenty-nine states, the District of Columbia, and three US territories have implemented RPS programmes that create demand for and incentivize renewably fuelled power generation.Footnote 28 As discussed, RPS policies require electric utility companies to source a predetermined portion of their retail sales from clean, renewable sources of energy. Utilities prove their compliance with these requirements through renewable energy credits (RECs).Footnote 29 Generators normally receive one such credit for every megawatt hour of electricity generated from qualifying resources.Footnote 30 Utilities can choose either to generate their own renewable electricity and receive RECs for it or to buy RECs from other generators. RPS programmes generally permit the sale of RECs jointly with or unbundled from the electricity for which the credits were originally awarded. Whichever path utilities choose for REC procurement, they can pass the associated costs on to their ratepayers.Footnote 31 In the end, RECs serve as a type of security that enables generators to monetize the renewable attributes of their electricity, with the exact value of these attributes and, hence, the credits subject to the forces of supply and demand in the REC marketplace.Footnote 32

Markets for unbundled RECs traded separately from the attendant electricity improve efficiency outcomes because they give utilities access to the lowest-cost renewable resources even when the latter lie outside the RPS policymaker's jurisdiction.Footnote 33 A utility operating in a state with poor solar and wind resources, for example, can significantly reduce its RPS compliance costs by purchasing cheap RECs from a state with rich renewable resources and abundant RECs. These efficiency gains come at a political cost, however, as the utility's ratepayers are now funding economic development outside their state. Sure enough, a number of state policymakers have tried to craft their RPS policies so as to capture more of the job creation, tax revenue, and other economic benefits they produce in-state. To do so, they required generation assets to be sited within state borders, to be constructed with in-state labour, or to use domestically manufactured hardware, among other factors.Footnote 34

It did not take long for fossil-fuel interests as well as out-of-state renewable generators to challenge these economically ‘patriotic’ RPS policies in court.Footnote 35 Between 2010 and 2012 alone, half a dozen states had to defend their RPS programmes against allegations that they had violated the US Constitution's Commerce Clause.Footnote 36 In pertinent part, the Commerce Clause expressly entrusts Congress with regulating trade among the states.Footnote 37 In addition to this affirmative grant of federal authority the Commerce Clause ‘has long been understood to have a “negative” aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce’.Footnote 38 For nearly 200 years the Supreme Court has interpreted this ‘negative’ or ‘dormant’ corollary of the Commerce Clause to prohibit ‘economic protectionism’ through ‘regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors’.Footnote 39

The intricacies of US dormant Commerce Clause jurisprudence and its application to state RPS policies lie beyond the scope of this article.Footnote 40 For present purposes, suffice to say there is near-universal scholarly consensus that location-based requirements that discriminate against out-of-state generators do not pass constitutional muster.Footnote 41 Sure enough, most state policymakers did not even bother to defend their RPS programmes. Instead, some settled the case in question to avoid the stigma of a judgment against their RPS while others responded with midnight-hour amendments to eliminate the controversial provisions of in-state favouritism.Footnote 42 Whatever the exact outcome, the struggles of state policymakers to craft competitive, constitutionally sound market-based policies that simultaneously promote global climate objectives and local economic interests are likely to have raised the appeal of non-competitive subsidy policies. After all, the Supreme Court has made it clear that states are generally free, under the Commerce Clause, to use straightforward subsidies to give in-state firms an advantage over their out-of-state competitors.Footnote 43

This dynamic might explain the widespread appeal of net energy metering policies found in some 40 states.Footnote 44 While details differ across jurisdictions and policies, net energy metering generally allows an electric utility's customer to run her meter forward when she draws power from the grid and backwards when she feeds power into the grid, such as from solar panels on the rooftop of her home.Footnote 45 Net metering effectively remunerates distributed generation of solar and other renewable electricity at the ratepayer's marginal retail rate, usually funded through ‘adders’ to her fellow ratepayers’ electricity bills. Further illustrating the appeal of non-competitive subsidies for clean energy, a number of states have experimented with European-style feed-in tariffs. These two-pronged policies guarantee clean power generators access to the grid as well as the ability to sell their output to the local utility at above-market rates.Footnote 46 Recent US adopters of feed-in tariff programmes to promote clean energy include California,Footnote 47 Hawaii,Footnote 48 Maine,Footnote 49 Oregon,Footnote 50 Rhode Island,Footnote 51 Vermont,Footnote 52 and Washington.Footnote 53 Unlike RPS policies, net metering programmes and feed-in tariffs alike make it easy for policymakers to ensure that most of the attendant economic benefits accrue in-state as their geographic reach is inherently limited to the service territory of local utilities.

The pervasive use of subsidies in lieu of market-based programmes should not be misinterpreted as a paradigm shift that sees the American public turning its back on free market capitalism and embracing big government.Footnote 54 Rather, in the context of clean energy policy, subsidy programmes may simply offer greater political appeal thanks to their heightened ability to pursue global environmental and local economic objectives simultaneously without running afoul of the US Constitution.

3. EUROPEAN UNION: BIG GOVERNMENT WITH A PENCHANT FOR MARKETS?

European economic governance has a rich history of favouring state intervention over private competition, especially when compared with the high levels of laissez-faire competition observed in the US.Footnote 55 Indeed, many of Europe's major economies are known for their large governmental apparatus devoted to healthcare and other aspects of social welfare.Footnote 56 The EU itself is frequently caricatured as an ‘overreaching bureaucratic beast’.Footnote 57 Some posit that this pervasive preference for big government is the product of widespread European scepticism of uncertainty and entrepreneurship.Footnote 58 Whatever the underlying motivation, the European public generally supports big government and the economic security it promises.Footnote 59 As the competitive pressures of a globalized economy continue to mount, EU politicians appear to be vying more than ever for government intervention in business.Footnote 60

However, not all sectors of the European economy adhere to this interventionist approach to economic governance. In a surprising departure from historical precedent, EU clean energy policy reflects a strong commitment to competitive, market-based mechanisms and, overall, far greater scepticism of subsidies than is evident among US policymakers. This pro-market policy landscape is driven, in part, by EU black-letter law, such as the general prohibition of state-aid subsidies that would distort competition in the EU's internal marketplace contained in Article 107 TFEU. It is further aided by an apparent lack of enforcement of other staples of EU law, including the fundamental freedoms,Footnote 61 making it easier for Member States to internalize the economic benefits of their competitive clean energy policies than it is for their counterparts at the US state level.

For nearly 20 years the EU has pushed for market-oriented mechanisms to promote the large-scale deployment of clean energy technologies among its Member States. Starting in 2001 with targets for renewable energy penetration set for each Member State,Footnote 62 EU policymakers eventually converged with the 2009 Renewable Energy Directive on a uniform 20% by 2020 target for the share of renewables in the union-wide electricity mix.Footnote 63 In response to the 2015 Paris AgreementFootnote 64 and mounting pressure to accelerate the transition to a low-carbon energy economy, the EU adopted the 2018 Renewable Energy Directive, raising the required share of renewables in the EU electricity mix to 32% by 2030.Footnote 65 The 2018 Directive is part of a broader EU initiative on climate and energy that includes the Clean Energy for All Europeans package,Footnote 66 the EU 2030 Climate and Energy Framework,Footnote 67 as well as the European Green Deal calling for carbon neutrality by 2050.Footnote 68

True to the EU's commitment to the principle of subsidiarity,Footnote 69 both the 2009 and 2018 Renewable Energy Directives leave it to each Member State to decide which support schemes to implement in order to reach the target percentage. Both Directives, in their definitional sections, clarify that the term ‘support scheme’ is to be construed broadly as ‘any instrument, scheme or mechanism … that promotes the use of energy from renewable sources’.Footnote 70 The same sections go on to list a non-exhaustive catalogue of sample schemes, including investment aid, tax incentives, RPS-like support programmes using REC-equivalent green certificates, as well as direct price support schemes, such as feed-in tariffs.Footnote 71 The latter reference, in particular, could easily be interpreted as a wholesale endorsement of state subsidy programmes and an invitation to let big government's strong hand guide the transition to a cleaner European energy economy. Such a reading would, however, ignore the growing pressure that the EU has been putting on Member States to replace subsidies and subsidy-esque support schemes with more market-based programmes.

Several Member States have had to defend their support programmes for clean energy against challenges that they violate the Article 107(1) TFEU general prohibition of state aid programmes that distort competition in the EU's internal marketplace, with varying success.Footnote 72 Critical to the application of Article 107 TFEU is the question whether the funds used to promote clean energy deployment constitute ‘state resources’.Footnote 73 A detailed discussion of the rich literature and jurisprudence on the EU treatment of state aid lies beyond the scope of this work.Footnote 74 In brief, any support scheme funded out of state coffers will be considered state aid and deemed a violation unless it falls within one of the narrow exemptions listed in Article 107(2) or (3) TFEU. Remarkably, TFEUFootnote 75 imposes an express ban on Member States’ use of the very type of ‘subsidy funded out of general revenue’ that the US Supreme Court endorses for American state-level policy makers.Footnote 76

Tasked with ensuring that all EU Member States fulfil their obligations under the various EU treaties,Footnote 77 the Commission exercises a key supervisory role to secure compliance with the state aid rules of Article 107 TFEU. To facilitate oversight, Member States are required to notify the Commission of proposed state aid measures pursuant to Article 108(3) TFEU. In addition, the Commission's practice to require Member States to recover illegally granted state aid funds from firms that benefit incentivizes whistleblowing by competitor firms, thereby reducing the appeal of secretly granted state aid.Footnote 78

An EU Member State's use of state resources to subsidize clean energy may pass muster if it falls under the Commission's 2014 General Block Exemption RegulationFootnote 79 or meets the stringent requirements laid out in its 2014 Guidelines on State Aid for Environmental Protection and Energy.Footnote 80 Throughout, the Block Exemption and Guidelines reflect the EU's strong preference for a competitive, market-based approach to clean energy policy. For example, to qualify for the Block Exemption, operating aid for utility-scale renewable power generators must be awarded pursuant to a competitive bidding process with clear, transparent, and non-discriminatory criteria.Footnote 81 Investment aid for the promotion of renewable energy may cover up to 100% of eligible costs only if granted in a competitive bidding process, with non-competitive aid awards generally limited to less than half of the recipient's costs.Footnote 82

The Guidelines on State Aid for Environmental Protection and Energy go one step further, seeking to dissuade national policymakers from reliance on state aid altogether. To this end, the Commission urges Member States to consider alternatives to state aid, highlighting that ‘regulation and market-based instruments are the most important tools to achieve environmental and energy objectives’.Footnote 83 Similarly, the Guidelines emphasize that state subsidies should be used only in instances where market failures prevent competitive markets from ensuring an efficient allocation of resources, and to the extent that said market failures are not already addressed by other policy measures, such as the EU Emissions Trading System.Footnote 84 Within the limited set of circumstances in which Member State subsidies may be permissible to promote renewable energy, the Commission urges the use of competitive bidding processes, auctions, and other market instruments to ensure the efficient allocation of said subsidies.Footnote 85 For renewably fuelled electricity the Guidelines further prescribe that, going forward, generators have to participate more actively in wholesale power markets, with subsidies limited to a premium paid in addition to the market price, and generators are required to assume the same forecasting and balancing responsibilities as their conventional counterparts.Footnote 86

To be clear, the EU's clean energy policy landscape is a far cry from the kind of free market capitalism advocated by the likes of Milton Friedman.Footnote 87 After all, Europe is generally considered the birthplace of the present-day feed-in tariff,Footnote 88 the most widely adopted direct-pricing policy to promote clean energy deployment across the globe.Footnote 89 In 2015, Europe still boasted the highest number of such policies of any region in the world;Footnote 90 but even feed-in tariffs, once the EU's sacred cow of clean energy policies, have increasingly come under attack from the European Commission.

How have feed-in tariffs that guarantee eligible generators above-market payments managed to become a staple of European clean energy policy in the first place, considering the Article 107 TFEU prohibition of state aid? The answer lies in policy design which ensures that these premium payments are funded not out of a Member State's budget but, rather, through surcharges collected from ratepayers by investor-owned utilities and network operators. In its seminal 2001 PreussenElektra decision, the European Court of Justice (ECJ) had signed off on this practice under Germany's feed-in tariff, finding that, without the transfer of state resources, the attendant premium payments did not constitute state aid within the purview of Article 107 TFEU.Footnote 91 Since then, however, the Court has doubled down on related regimes in a series of similarly situated cases, finding that privately collected funds passing through entities under public control could constitute state resources and, hence, state aid under Article 107 TFEU.Footnote 92 The most recent of these cases appears to slow this trend somewhat as, in early 2019, the ECJ reversed the General Court's finding that the 2012 version of Germany's feed-in tariff involved the use of state resources.Footnote 93 On appeal, the Court distinguished Germany's policy implementation from those featured in its earlier decisions and found that the surcharge payments did not fall under the dispositive control of the German government because of the degree of independence enjoyed by the country's network operators who collect the surcharge from ratepayers and distribute it to eligible generators. This latest wrinkle notwithstanding, it appears as though feed-in tariffs have largely fallen out of favour with the EU judiciary, making their continued use an increasingly risky undertaking for European policymakers.

This trend might help to explain the growing popularity of RPS-equivalent quota obligations among EU Member States. Starting in 2002, Belgium, Denmark, Ireland, Italy, Norway, Poland, Sweden, and the United Kingdom (UK) have all used market-based programmes to promote the deployment of clean energy technologies.Footnote 94 In 2018, the European market for green certificates for hydro, wind, and solar electricity reached a record high of 600 terawatt hours,Footnote 95 more than 20% of the US aggregate electricity consumption for that year.Footnote 96

Another potential factor behind the popularity of green certificate schemes in the EU is that Member States have been getting away with programmes that actively discriminate against out-of-state generators.Footnote 97 The UK's Renewables Obligation, for example, expressly states that electricity transmitted into Great Britain through an interconnector does not qualify for the issuing of a green certificate.Footnote 98 Similarly, Belgium has never accepted foreign green certificates nor issued certificates for renewable electricity imported from other countries.Footnote 99 In the US, state RPS policies featuring such discriminatory measures are all but certain to be struck down for violating the US Constitution's dormant Commerce Clause.Footnote 100 One might expect a similar outcome in the EU as a result of the restricting effect on the free movement of goods within the internal EU market, as guaranteed under Article 34 TFEU. Sure enough, the European Commission has repeatedly criticized Member States for adopting renewable energy support schemes that discriminate against other Member States, calling for support schemes to be more open to energy generated beyond the borders of the adopting Member State.Footnote 101 Not all EU institutions, however, seem to share the Commission's sceptical stance towards discriminatory clean energy policies, as evidenced by three recent ECJ decisions.Footnote 102

In the Ålands Vindkraft case, the Court upheld Sweden's discriminatory green certificate scheme against the complaint of a Finnish wind generator whose electricity was not eligible for the award of certificates recognized under Swedish law.Footnote 103 While the judges acknowledged that Sweden's certificate programme restricted the free movement of goods as a functional equivalent to quantitative restrictions on imports within the meaning of Article 34 TFEU, they found this restriction justified by the public interest objective of promoting the use of renewable energy sources on public policy grounds according to Article 36 TFEU.Footnote 104

In the consolidated Essent Belgium I cases, the ECJ similarly upheld the Flemish Electricity Decree of 2000Footnote 105 against complaints that the Decree restricted the free movement of goods by recognizing only green certificates issued for electricity generated within the Flemish region.Footnote 106 As in Ålands Vindkraft, the Court viewed the Flemish support scheme as functionally equivalent to the type of quantitative restrictions on imports prohibited under Article 34 TFEU but found this restriction to be justified pursuant to Article 36 TFEU based on the public interest in promoting renewable energy.Footnote 107

In Essent Belgium II, the ECJ did find another Flemish energy regulation to restrict the free movement of goods in violation of Article 34 TFEU because it mandated free distribution for renewable electricity from generators interconnected to the local distribution system, but denied the same privileges to renewable electricity from other, foreign generators.Footnote 108 Yet those hoping for a judicial paradigm shift were sorely disappointed. As in Essent Belgium I and Ålands Vindkraft, the Court once again stressed the promotion of renewable energy as public interest grounds suitable for justification of discriminatorily restrictive measures under Article 36 TFEU.Footnote 109 The Flemish regulation failed to pass muster only because the judges found the distribution freebie – of direct benefit to utilities and their customers, rather than generators – inappropriate and hence not proportionate to the aim of promoting the objective of increasing generation of renewable electricity, as adopted by the EU legislature.Footnote 110

It is worth noting that the US Supreme Court, in over two centuries of Commerce Clause jurisprudence, has only once accepted a public interest justification for overtly discriminatory state policies.Footnote 111 The kind of public interest justification cited in defence of the certificate schemes of Sweden and Flanders would all but certainly fail before a US court.Footnote 112 The demonstrated willingness of the ECJ to uphold renewable energy support schemes even when they restrict the free movement of goods is frequently explained by the judicial deference to the EU legislature's aggressive climate and clean energy policies.Footnote 113 Indeed, the most recent 2018 Renewable Energy Directive expressly grants Member States the right to craft their support schemes in such a way that they support only renewable electricity produced within state borders.Footnote 114 Whatever the motive, unlike their American counterparts EU judges prioritize the timely transition to a clean energy economy over unrestricted competition among its Member States, especially for policies that harness the competitive forces of a Member State's domestic market.

4. CONCLUDING THOUGHTS AND OUTLOOK

Renewable energy has entered the mainstream. Solar, wind, and other clean energy technologies continue to come down the cost curve and have, under favourable circumstances, achieved grid parity.Footnote 115 With technology-related risk no longer a serious issue, clean-tech developers and their investors can afford to assume more market risk than was the case in the industry's fledgling years.Footnote 116 Policymakers across the globe are increasingly replacing clean energy subsidies with green certificate schemes, competitive bidding, and other market-oriented mechanisms.Footnote 117

Contrary to the country's general pro-market reputation and rhetoric, the US appears to swim somewhat against the current of competitive clean energy policy design. Federal policy support for solar, wind, and other renewables continues to come primarily in the form of subsidies administered under the tax code. A majority of state-level policymakers have embraced market-based mechanisms in the form of RPS policies, but the political appeal of these programmes is hampered by constitutional challenges to capturing attendant economic benefits in-state. The Supreme Court's dormant Commerce Clause jurisprudence leaves little doubt that states cannot deny access to their clean energy markets to out-of-state firms without running afoul of the US Constitution. Ironically, the constitutional safeguards for interstate competition appear to have a stifling effect on competition in the American clean energy marketplace more broadly, as state policymakers resort to subsidies as a constitutionally safer means to favour in-state firms over out-of-state competitors and promote local economic development.

By comparison, the EU presents itself as a downright champion of competitive clean energy policy. The ECJ continues to push back against attempts by Member States to circumvent the Article 107 TFEU prohibition on state-aid subsidies through creative feed-in tariff design. The European Commission, meanwhile, urges Member States to accelerate the shift from subsidies to competitive, market-based clean energy policies through its Guidelines.Footnote 118 Even within the exceedingly narrow scope left for subsidies, Member States are required to implement bidding and other competitive processes to ensure the most efficient allocation of state funds. The EU's push for more competitive clean energy policy design is aided by the fact that Member States are free to reserve access to their clean energy markets to in-state firms, even where such market protection restricts the free movement of goods within the union's internal marketplace. In contrast to their US counterparts, the EU judiciary appears to prioritize the timely transition to a clean, low-carbon energy economy over the ideal of unfettered trade and competition among its Member States.

Whether this value judgment reflects the lower degree of integration among the constituent polities of the EU compared with the US federal system or differing attitudes towards the urgency of climate change, among other causes, remains an open question for future research to explore. Similarly, only time will tell which clean energy policy approach – the EU's push for greater intrastate competition or the steadfast US defence of interstate competition – will pay greater dividends going forward.

Footnotes

This contribution is part of a collection of articles growing out of the workshop ‘The Law of Energy Transition in Federal Systems’, held by the University of Tübingen, Faculty of Law, and the University of North Carolina at Chapel Hill, School of Law, in Tübingen (Germany), 27 June 2019.

I would like to thank Lora Naismith and Natalie Irwin for their excellent research assistance as well as two anonymous TEL reviewers for their thoughtful comments and suggestions.

References

1 See, e.g., J. Cost, ‘The Politics of Distrust’, Wall Street Journal, 16 Oct. 2015, available at: https://www.wsj.com/articles/the-politics-of-distrust-1445015969 (describing bipartisan US neoliberalism's view of free market capitalism as the main engine of prosperity to be encouraged, but only lightly regulated, by government).

2 See, e.g., Philippon, T., The Great Reversal: How America Gave Up on Free Markets (Belknap Press, 2019), p. 127CrossRefGoogle Scholar (describing the EU as an ‘overreaching bureaucratic beast’ that favours state intervention over private competition).

3 See, e.g., Davies, L., ‘Power Forward: The Argument for a National RPS’ (2010) 42(5) Connecticut Law Review, pp. 1340–403, at 1364–5Google Scholar (describing the Congressional deadlock over a nationwide US clean energy mandate, often referred to as a ‘renewable portfolio standard’ or ‘clean energy standard’).

4 See, e.g., Mormann, F., ‘Beyond Tax Credits: Smarter Tax Policy for a Cleaner, More Democratic Energy Future’ (2014) 31(2) Yale Journal on Regulation, pp. 303–61, at 313–7Google Scholar (tracing the history of US federal tax support for renewable energy).

5 See N.C. Clean Energy Technology Center, ‘Renewable & Clean Energy Standards’, June 2019, available at: https://s3.amazonaws.com/ncsolarcen-prod/wp-content/uploads/2019/07/RPS-CES-June2019.pdf.

6 See, e.g., Illinois Commerce Commission v. Federal Energy Regulation Commission (FERC), 721 F.3d 764 (7th Cir. 2013), at 776 (noting that a state cannot craft its RPS programme to prohibit counting out-of-state resources towards the state's sourcing requirement without violating the US Constitution's dormant Commerce Clause).

7 See, e.g., West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994), at 199 (‘A pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business’); New Energy Company of Indiana v. Limbach, 486 U.S. 269 (1988), at 278 (‘The Commerce Clause does not prohibit all state action designed to give its residents an advantage in the marketplace, but only action of that description in connection with the State's regulation of interstate commerce. Direct subsidization of domestic industry does not ordinarily run afoul of that prohibition’) (emphasis added).

8 See Directive 2001/77/EC on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market [2001] OJ L 283/33; Directive 2009/28/EC on the Promotion of the Use of Energy from Renewable Sources, amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC [2009] OJ L 140/16 (Renewable Energy Directive 2009); Directive 2018/2001/EU on the Promotion of the Use of Energy from Renewable Sources [2018] OJ L 328/82 (Renewable Energy Directive 2018).

9 See, e.g., the United Kingdom's (UK) Renewables Obligation, closed to new generators from Apr. 2017: Ofgem, ‘About the RO’, available at: https://www.ofgem.gov.uk/environmental-programmes/ro/about-ro; Belgium's Green Certificate Scheme, details available at: https://www.iea.org/policies/21626-green-certificate-scheme-federal?country=Belgium&q=belgium. See IEA, n. 94 below, and accompanying text.

10 Lisbon (Portugal), 13 Dec. 2007, in force 1 Dec. 2009 [2012] OJ C 326/47, available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2012:326:FULL:EN:PDF.

11 See N. Lalwani, ‘When Americans Get Good Government Service, They Mistakenly Give the Credit to the Private Sector’, Washington Post, 29 Aug. 2019, available at: https://www.washingtonpost.com/politics/2019/08/29/when-americans-get-good-government-service-they-mistakenly-give-credit-private-sector.

12 ‘Public Trust in Government: 1958–2019’, Pew Research Center, 11 Apr. 2019, available at: https://www.people-press.org/2019/04/11/public-trust-in-government-1958-2019.

13 Cost, n. 1 above.

14 See ‘Global Competitiveness Index 4.0’, World Economic Forum, 2018, available at: http://reports.weforum.org/global-competitiveness-report-2018/competitiveness-rankings.

15 The theory of American exceptionalism is generally traced back to Alexis de Toqueville; see de Toqueville, A., Democracy in America Part 2 (Langley, 1840), pp. 36–7Google Scholar.

16 See Ralls, M.A., ‘Congress Got it Right: There's No Need to Mandate Renewable Portfolio Standards’ (2008) 27(2) Energy Law Journal, pp. 451–72, at 452–3; Davies, n. 3 above, pp. 1364–5Google Scholar.

17 See American Clean Energy and Security Act, H.R. 2454, 111th Cong. § 101(a) (2009) (proposing to add § 610, a provision for a ‘Combined Efficiency and Renewable Electricity Standard’ to the Public Utilities Regulatory Policy Act (PURPA)).

18 Available at: https://www.congress.gov/bill/111th-congress/house-bill/2454/all-actions?q=%7B%22search%22%3A%5B%22H.R.+2454%22%5D%7D&r=1&overview=closed&s=9#tabs.

19 See Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, (2015) 80 Federal Register, pp. 64662–964, 23 Oct. 2015 (to be codified at 40 C.F.R. pt. 60); implementation stayed until resolution of pending challenges per West Virginia v. EPA, 136 S. Ct. 1000 (2016); repealed by the Affordable Clean Energy Rule, (2019) 84 Federal Register, pp. 32520–84, 8 July 2019 (to be codified at 40 C.F.R. pt. 60).

20 For a representative snapshot of the rich scholarly discussion of the Clean Power Plan, see, e.g., Hammond, E. & Pierce, R., ‘The Clean Power Plan: Testing the Limits of Administrative Law and the Electric Grid’ (2016) 1(1) George Washington Journal of Energy & Environment Law, pp. 1–17Google Scholar; Wiseman, H. & Osofsky, H., ‘Regional Energy Governance and U.S. Carbon Emissions’ (2016) 43(1) Ecology Law Quarterly, pp. 143–235Google Scholar; Carbonell, T., ‘EPA's Proposed Clean Power Plan: Protecting Climate and Public Health by Reducing Carbon Pollution from the U.S. Power Sector’ (2015) 33(2) Yale Law & Policy Review, pp. 403–26Google Scholar.

21 See sources at n. 19 above.

22 26 U.S.C. § 45.

23 26 U.S.C. § 25D, § 48.

24 26 U.S.C. § 168.

25 For another prominent example of federal policy support for clean energy, consider the Department of Energy's Loan Guarantee Program, as authorized under sections 1703 and 1705 of the Energy Policy Act of 2005 (Public Law No. 109-58, 119 Stat. 594), as amended by the American Recovery and Reinvestment Act of 2009 (Public Law No. 111-5, 123 Stat. 115).

26 See, e.g., Mormann, F., ‘Fading into the Sunset: Solar and Wind Get Five More Years of Tax Credits with a Phase-Down’ (2016) 47(5) ABA Trends, pp. 9–14Google Scholar.

27 See Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2018–2022 (U.S. Government Printing Office, 2018), pp. 21–2.

28 See N.C. Clean Energy Technology Center, n. 5 above.

29 Internationally, renewable energy credits are also referred to as ‘tradable green certificates’ or ‘renewable energy guarantees of origin’; see, e.g., Toke, D., ‘Are Green Electricity Certificates the Way Forward for Renewable Energy? An Evaluation of the United Kingdom's Renewables Obligation in the Context of International Comparisons’ (2005) 23(3) Environment and Planning C: Government and Policy, pp. 361–75CrossRefGoogle Scholar.

30 But see Davies, n. 3 above, pp. 1359, 1378 (noting that some jurisdictions award RECs for every kilowatt hour of renewably generated electricity).

31 See Fershee, J., ‘Moving Power Forward: Creating a Forward-Looking Energy Policy Based on a National RPS’ (2010) 42(5) Connecticut Law Review, pp. 1405–22, at 1410Google Scholar.

32 For a thoughtful discussion of the dynamics of REC trading, see Berendt, C., ‘A State-Based Approach to Building a Liquid National Market for Renewable Energy Certificates: The REC-EX Model’ (2006) 19(5) The Electriciy Journal, pp. 54–68CrossRefGoogle Scholar.

33 See, e.g., N. Rader & S. Hempling, The Renewables Portfolio Standard: A Practical Guide (National Association of Regulatory Utility Commissioners, 2001), p. 57 (enumerating the various efficiency benefits of competitive RPS policies and REC trading).

34 For an overview of the various location-based tweaks made to state-level RPS programmes in order to prevent spillover of the attendant economic benefits, see Mormann, F., ‘Market Segmentation vs. Subsidization: Clean Energy Credits and the Commerce Clause's Economic Wisdom’ (2018) 93(4) Washington Law Review, pp. 1853–901, at 1867Google Scholar.

35 More recently, India has successfully challenged the local content requirements and preferences in the RPS programmes of Delaware and Michigan before the World Trade Organization (WTO); see United States – Certain Measures Relating to the Renewable Energy Sector, Panel Report, WTO Doc. WT/DS510/R, adopted 27 June 2019.

36 See Nichols v. Markell, No. CV 12-777-CJB, 2014 WL 1509780, District of Delaware (17 Apr. 2014), reported at Westlaw, pp. 1–30, at 22–5 (challenging Delaware's RPS); American Tradition Institute v. Colorado, 876 F.Supp.2d 1222 (D. Colo. 2012), at 1227–8 (challenging Colorado's RPS); North Dakota v. Swanson, No. 11-3232 SRN/SER, 2012 WL 4479246, District of Minnesota (20 Sept. 2012) (challenging Minnesota's Next Generation Energy Act); Application of Public Utility District No. 1 of Cowlitz County for Rehearing of Decision 11-12-052 (20 Jan. 2012) (challenging California's RPS); Complaint at 3-17, TransCanada Power Marketing Ltd v. Bowles, No. 4:10cv-40070-FDS, District of Massachusetts (16 Apr. 2010) (challenging Massachusetts’ RPS); Missouri ex rel. Missouri Energy Development Association v. Public Service Commission, Nos. 10AC-CC00511, 10AC-CC00512, 10AC-CC00513, 10AC-CC00528, 10AC-CC536, Doc. No. SL01DOCS\3510904.2, Missouri Court of Appeals (29 June 2011) (challenging Missouri's RPS).

37 U.S. Constitution, Art. I, § 8, cl. 3.

38 Oregon Waste Systems, Inc. v. Department of Environmental Quality, 511 U.S. 93 (1994), at 98 (citing Wyoming v. Oklahoma, 502 U.S. 437 (1992), at 454; Welton v. Missouri, 91 U.S. 275 (1876).

39 West Lynn Creamery, Inc. v. Healy, n. 7 above, pp. 192–3 (citing New Energy Co. of Indiana v. Limbach, n. 7 above, pp. 273–4).

40 Interested readers are encouraged to consult the following sources: Kalen, S., ‘Dormancy versus Innovation’ (2013) 65(3) Oklahoma Law Review, pp. 381–426Google Scholar; Lee, D. & Duane, T., ‘Putting the Dormant Commerce Clause Back to Sleep: Adapting the Doctrine to Support State Renewable Portfolio Standards’ (2013) 43(2) Environmental Law, pp. 295–364Google Scholar; Mormann, F., ‘Constitutional Challenges and Regulatory Opportunities for State Climate Policy Innovation’ (2017) 41(1) Harvard Environmental Law Review, pp. 189–242Google Scholar.

41 See, e.g., Kalen, n. 40 above; Lee & Duane, n. 40 above; Barsa, M. & Dana, D., ‘A Climate Change Lens on the Dormant Commerce Clause, Lifecycle GHG Taxes, and In-State RPSS Requirements’ (2014) 5 San Diego Journal Climate & Energy Law, pp. 69–93, at 71–2Google Scholar; Englese, D., ‘Tilting at Windmills: Finding an Alternative Dormant Commerce Clause Framework to Preserve Renewable Portfolio Standard Generator Location Requirements’ (2015) 47(3) Arizonia State Law Journal, pp. 983–1015, at 1002Google Scholar; but see Griffin, W., ‘Renewable Portfolio Standards and the Dormant Commerce Clause: The Case for In-Region Location Requirements’ (2014) 41(1) Boston College Environmental Affairs Law Review, pp. 133–65, at 161Google Scholar (arguing that in-region requirements in Massachusetts’ state RPS could be deemed constitutional under existing dormant Commerce Clause doctrine). See also Engel, K., ‘The Dormant Commerce Clause Threat to Market-Based Environmental Regulation: The Case of Electricity Deregulation’ (1999) 26(2) Ecology Law Quarterly, pp. 243–349, at 324Google Scholar (showing true prescience in calling for reform of dormant Commerce Clause doctrine to legitimize state favouritism more than a decade before the first challenges to state RPS policies).

42 See, e.g., Nichols v. Markell, No. CV 12-777-CJB, District of Delaware (20 Oct. 2015), slip opinion, reported at Westlaw, pp. 1–13, at 2–3 (Delaware's settlement with FuelCell Energy); State, ex rel. Missouri Energy Development Association v. Public Service Commission, Missouri Court of Appeals, 386 S.W.3d 165 (2012), at 176; 2013 Colorado Legislation Service, Ch. 414 (S.B. 13-252) (2013) (eliminating Colorado's in-state generator requirements); Massachusetts Department of Public Utilities, Order Adopting Emergency Regulations, Decision No. DPU 10-58, 9 June 2010 (suspending Massachusetts's in-state generator requirements and striking the words ‘within the Commonwealth of Massachusetts, its waters, or adjacent federal waters’ from its regulations at 220 Mass. Code Regs 17.01(1) (2009) and ‘in the Commonwealth of Massachusetts’ from 220 Mass. Code Regs 17.05(1)I(4) (2009)); ‘TransCanada Renewable Lawsuit Scores a Win in MA’, Climate Lawyers Blog, 11 June 2010, available at: http://climatelawyers.com/post/2010/06/11/TransCanada-renewable-lawsuit-scores-a-win-in-MA.aspx (Massachusetts’ settlement with TransCanada).

43 See, e.g., West Lynn Creamery, Inc. v. Healy, n. 7 above, p. 199 (‘A pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business’); New Energy Company of Indiana v. Limbach, n. 7 above, p. 278 (‘The Commerce Clause does not prohibit all state action designed to give its residents an advantage in the marketplace, but only action of that description in connection with the State's regulation of interstate commerce. Direct subsidization of domestic industry does not ordinarily run afoul of that prohibition’ (emphasis added)). The Supreme Court's endorsement of state-level subsidies that discriminate against out-of-state competitors, from a Commerce Clause angle, does not, however, protect state clean energy subsidy programmes from challenges under international trade law; see United States – Certain Measures Relating to the Renewable Energy Sector, n. 35 above (finding that the in-state content requirements and preferences in clean energy subsidy programmes adopted by California, Connecticut, Minnesota, Montana, and Washington are inconsistent with US obligations under Art. III:4 of the 1994 General Agreement on Tariffs and Trade).

44 See Revesz, R. & Unel, B., ‘Managing the Future of the Electric Grid: Distributed Generation and Net Metering’ (2017) 41(1) Harvard Environmental Law Review, pp. 43–108, at 47, 59Google Scholar; N.C. Clean Energy Technology Center, ‘Net Metering’, Oct. 2019, available at: https://s3.amazonaws.com/ncsolarcen-prod/wp-content/uploads/2019/10/DSIRE_Net_Metering_Oct2019.pdf.

45 See, e.g., Edison Electric Institute, ‘Solar Energy and Net Metering’, Jan. 2016, pp. 1–2, available at: https://www.eei.org/issuesandpolicy/generation/NetMetering/Documents/Straight%20Talk%20About%20Net%20Metering.pdf.

46 For a thoughtful summary of feed-in tariff design and implementation features, see Mendonça, M., Jacobs, D. & Sovacool, B., Powering the Green Economy: The Feed-In Tariff Handbook (Earthscan, 2009), pp. 15–6CrossRefGoogle Scholar; Rickerson, W., Sawin, J.L. & Grace, R.C., ‘If the Shoe FITs: Using Feed-in Tariffs to Meet U.S. Renewable Electricity Targets’ (2007) 20(4) The Electricity Journal, pp. 73–86CrossRefGoogle Scholar.

47 See S.B. 32, 2007–2008 Sess. (California 2008).

48 See Decisions and Orders, Docket 2008-0273, Hawaii Public Utility Commission (2008).

49 See S.P. 367, 126th Legislation (Maine 2013), An Act to Establish the Renewable Energy Feed-in Tariff.

50 See H.B. 3039 (Oregon 2009), H.B. 3690 (Oregon 2009), and implementing Orders 10-198, 10-200, 11-339 by the Oregon Public Utilities Commission.

51 See H.B. 6104 (Rhode Island 2011).

52 See Public Act No. 45 (2009 Vermont, Bien. Sess.); Public Act No. 170 (2012 Vermont. Adj. Sess.).

53 See S.B. 5101 (Washington 2005); S.B. 6170 (Washington 2009); S.B. 6658 (Washington 2010).

54 Others, however, have recently made such bold claims; see Philippon, n. 2 above.

55 Ibid., p. 125.

56 D. Kinkade, ‘The Limits of Big Government: Northern Europe Inches Toward Free Market’, US Chamber of Commerce, 13 Mar. 2014, available at: https://www.uschamber.com/above-the-fold/the-limits-big-government-northern-europe-inches-toward-free-market.

57 Philippon, n. 2, p. 127.

58 See J. Pethokoukis, ‘Why Europe Failed to Match America's Tech Boom’, The Week, 9 Sept. 2016, available at: https://theweek.com/articles/647136/why-europe-failed-match-americas-tech-boom.

59 See D. Meegan, ‘Big Government in America Part One: Egalitarian Europeans and Humanitarian Americans’, NewStatesmanAmerica, 19 June 2019, available at: https://www.newstatesman.com/world/north-america/2019/06/big-government-america-part-one-egalitarian-europeans-and-humanitarian.

60 See, e.g., ‘A French Habit is Spreading’, The Economist, 7 Mar. 2019, available at: https://www.economist.com/leaders/2019/03/07/a-french-habit-is-spreading.

61 See Titles II and IV TFEU (establishing the free movement of goods, the free movement of capital, the freedom to establish and provide services, and the free movement of persons within the EU's common market).

62 See Directive 2001/77/EC, n. 8 above, amended by Directive 2003/30/EC on the Promotion of the Use of Biofuels or other Renewable Fuels for Transport [2003] OJ L 123/42.

63 See Renewable Energy Directive 2009, n. 8 above (setting a union-wide requirement that 20% of the energy consumed within the EU comes from renewable sources).

64 Paris (France), 12 Dec. 2015, in force 4 Nov. 2016, available at: http://unfccc.int/paris_agreement/items/9485.php.

65 See Renewable Energy Directive 2018, n. 8 above (recasting and set to repeal the Renewable Energy Directive 2009 by 1 July 2021).

66 See European Commission, ‘Clean Energy for All Europeans’, 30 Nov. 2016, COM(2016) 860 final.

67 See European Commission, ‘2030 Framework for Climate & Energy: Outcome of the October 2014 European Council’, Oct. 2014, available at: https://ec.europa.eu/clima/sites/clima/files/strategies/2030/docs/2030_euco_conclusions_en.pdf.

68 See European Commission, ‘European Green Deal’, 11 Dec. 2019, COM(2019) 640 final.

69 See Art. 5(3) TFEU and Protocol (No. 2) on the Application of the Principles of Subsidiarity and Proportionality [2008] OJ C 115/206.

70 See Renewable Energy Directive 2009, n. 8 above, Art. 2(k); Renewable Energy Directive 2018, n. 8 above, Art. 2(5).

71 Ibid.

72 See, e.g., Case C-379/98, PreussenElektra, ECLI:EU:C:2001:160 (upholding Germany's feed-in tariffs for renewables); Case C-206/06, Essent Network Noord and Others, ECLI:EU:C:2008:413 (European Court of Justice finding that a Dutch electricity surcharge to recover stranded costs constituted illegal state aid); Case C-262/12, Vent De Colère and Others, ECLI:EU:C:2013:851 (finding that France's cost-recovery mechanism for utility payments for wind power at above-market rates violated the general prohibition of state aid in Art. 107(1) TFEU); Case T-251/11, Austria v. Commission, ECLI:EU:T:2014:1060 (holding that parts of Austria's Green Electricity Law afford state aid in violation of Art. 107(1) TFEU); Case C-515/16, Enedis SA, ECLI:EU:C:2017:217 (finding that France's 2006 and 2010 solar feed-in tariffs constituted state aid in violation of Art. 107(1) TFEU).

73 See generally Vasbeck, D., ‘State Aid, the Criterion of State Resources and Renewable Energy Support Mechanisms: Fresh Wind from Luxembourg in EEG 2012’ (2019) 4(2) European Papers online articles, pp. 629–40Google Scholar, available at: https://www.europeanpapers.eu/en/europeanforum/state-aid-the-criterion-of-state-resources-and-renewable-energy-support-mechanisms.

74 Interested readers are encouraged to consult Lopez, J.J. Piernas, The Concept of State Aid under EU Law: From Internal Market to Competition and Beyond (Oxford University Press, 2015)CrossRefGoogle Scholar; Bacon, K., European Union Law of State Aid (Oxford University Press, 2017)Google Scholar; Stuart, E. & Roginska-Green, I., Sixty Years of E.U. State Aid Law and Policy: Analysis and Assessment (Wolters Kluwer, 2018)Google Scholar; Kassim, H. & Lyons, B., ‘The New Political Economy of E.U. State Aid Policy’ (2013) 13 Journal of Industry, Competition and Trade, pp. 1–21CrossRefGoogle Scholar; Cini, M., ‘The Soft Law Approach: Commission Rule-Making in the E.U.'s State Aid Regime’ (2001) 8(2) Journal of European Public Policy, pp. 192–207CrossRefGoogle Scholar.

75 N. 10 above.

76 See sources at n. 43 above and accompanying text.

77 Art. 258 TFEU.

78 See, e.g., Blauberger, M., Of “Good” and “Bad” Subsidies: European State Aid Control through Soft and Hard Law’ (2009) 32(4) West European Politics, pp. 719–37, at 721CrossRefGoogle Scholar.

79 See Commission Regulation (EU) No. 651/2014 Declaring Certain Categories of Aid Compatible with the Internal Market in Application of Articles 107 and 108 of the Treaty [2014] OJ L 187/1 (General Block Exemption Regulation).

80 See Commission Communication, ‘Guidelines on State Aid for Environmental Protection and Energy 2014-2020’ [2014] OJ C 200/1.

81 General Block Exemption Regulation, n. 79 above, Art. 42(2). For exceptions to the competitive-bidding requirement for smaller-scale generators, see Art. 42(8).

82 Ibid., Art. 41(7)–(10).

83 ‘Guidelines on State Aid for Environmental Protection and Energy’, n. 80 above, para. 41.

84 Ibid., paras 34, 36.

85 Ibid., para. 109. See also para. 126, requiring the use of competitive-bidding processes for subsidy allocation, effective 1 Jan. 2017.

86 Ibid., para. 124. For an introduction to the functioning of wholesale power markets and the importance of participants’ forecasting and balancing responsibilities, as well as associated challenges for renewable power generators, see Klessmann, C., Nabe, C. & Burges, K., ‘Pros and Cons of Exposing Renewables to Electricity Market Risks: A Comparison of the Market Integration Approaches in Germany, Spain, and the UK’ (2008) 36(10) Energy Policy, pp. 3646–61CrossRefGoogle Scholar.

87 See, e.g., Friedman, M., Capitalism and Freedom (University of Chicago Press, 1962)Google Scholar.

88 See Mendonça, Jacobs & Sovacool, n. 46 above, p. 77 (also noting the US influence on the feed-in tariffs first adopted by Portugal, Germany, and Denmark).

89 See Renewable Energy Policy Network for the 21st Century (REN21), Renewables 2016 Global Status Report (REN21, 2016), p. 112.

90 Ibid., p. 113.

91 Vasbeck, n. 73 above.

92 See Case C-206/06, Essent Netwerk Noord and Others, 17 July 2008; Case C-262/12, Vent De Colère and Others, ECLI:EU:C:2013:851; Case T-251/11, Austria v. Commission, ECLI:EU:T:2014:1060; Case C-515/16, Enedis SA, ECLI:EU:C:2017:217.

93 See Case C-405/16, Germany v. Commission, ECLI:EU:C:2019:268. For a primer on Germany's Erneuerbare Energien Gesetz 2012, see Davies, L. & Allen, K., ‘Feed-in Tariffs in Turmoil’ (2014) 116(3) West Virginia Law Review, pp. 937–1005, at 958Google Scholar.

94 See International Energy Agency (IEA), Deploying Renewables: Best and Future Policy Practice (IEA, 2011), pp. 147–8.

95 See F. Simon, ‘Calls Grow for E.U.-Wide Certificates to Boost Market for “Green Gas”’, EURACTIV, 3 Oct. 2019, available at: https://www.euractiv.com/section/energy/news/calls-grow-for-eu-wide-certificates-to-boost-market-for-green-gas.

96 See T. Wang, ‘Total Electricity End Use in the U.S. from 1975 to 2019’, Statista, available at: https://www.statista.com/statistics/201794/us-electricity-consumption-since-1975.

97 For a comprehensive account of the tensions between EU energy policy and the free movement of goods, see Penttinen, S.-L., Free Movement and the Energy Sector in the European Union: The Role of the European Court of Justice (Routledge, 2020)CrossRefGoogle Scholar.

98 See Renewables Obligation Order 2015, SI 2015/1947, Art. 21(2)(b). See also H. van der Linden, Review of International Experience with Renewable Energy Obligation Support Mechanisms (Energieonderzoek Centrum Nederland, 2005), p. 22, available at: http://eta-publications.lbl.gov/sites/default/files/report-lbnl-57666.pdf.

99 See Jansson, M.S., ‘Free Movement of Electricity and the Revival of System Stability Justifications’ (2017) 18(3) German Law Journal, pp. 595–616, at 597CrossRefGoogle Scholar.

100 Ibid.

101 See, e.g., Szydlo, M., ‘How to Reconcile National Support for Renewable Energy with Internal Market Obligations: The Task for the EU Legislature after Ålands Vindkraft and Essent’ (2015) 52(2) Common Market Law Review, pp. 489–510, at 490Google Scholar (referring to state-aid cases and the 2014 Guidelines on State Aid for Environmental Protection and Energy (n. 80 above) as evidence of the Commission's campaign against discriminatory support schemes for renewable energy).

102 The heterogeneity among EU institutions at the intersection of clean energy policy and fundamental freedoms is perhaps best illustrated by Attorney General Bot, who sided with the Commission in suggesting that the discriminatory support schemes in question be struck down; see Opinion of AG Bot in Joined Cases C-204–208/12, Essent Belgium, ECLI: EU:C:2013:294; Opinion of AG Bot in Case C-573/12, Ålands Vindkraft, ECLI:EU:C:2014:37.

103 See Case C-573/12, Ålands Vindkraft AB v. Energimyndigheten, ECLI:EU:C:2014:2037.

104 Ibid., paras 65–82.

105 Authority over energy regulation in Belgium is allocated among the Flemish region, the Walloon region, and the Brussels-Capital region; see ‘The Powers of the Regions’, available at: http://www.belgium.be/en/about_belgium/government/regions/competence.

106 See Joined Cases C-204 to 208/12, Essent Belgium NV v. Vlaamse Regulierungsinstantie voor de Elektriciteits- en Gasmarkt, ECLI:EU:C:2014:2192.

107 Ibid., paras 77–95.

108 See Case C-492/14, Essent Belgium v. Vlaams Gewest, ECLI:EU:C:2016:732.

109 Ibid., para. 101.

110 Ibid., paras 111–6.

111 See Maine v. Taylor, 477 U.S. 131 (1986) (upholding a Maine statute banning the import of live baitfish from out-of-state in the interest of protecting the domestic lobster population).

112 See sources at n. 41 above.

113 See, e.g., Penttinen, S.-L., ‘The Next Chapter in the Saga of Renewable Energy Support Schemes: Still “a Certain Degree of Mystery” after Essent Belgium II’ (2018) 43(1) European Law Review, pp. 106–19, at 114Google Scholar (‘the Court has been seen to respect the policy choices adopted by the legislature in particular as regards the [renewable energy] support schemes despite the restrictive effects the schemes entail with regards to cross-border movement’); Fouquet, D. & Guarrata, A., ‘Judgment of 1st July 2014 in Ålands Vindkraft AB v Energimyndigheten: Comments on Case C-573/12’ (2014) 5(1) Renewable Energy Law & Policy Review, pp. 52–9, at 59Google Scholar (‘the Court concluded that, as EU law currently stands, Member States are able to consider that, for those purposes [of promoting the transition to green energy] the national support scheme should be reserved to the national production of green electricity’); Szydlo, n. 101 above, p. 507 (‘one comes to the conclusion that the ECJ relied entirely … on the political decisions taken by the E.U. legislature, and respected these decisions with great reference’); Davies, G., ‘Legislative Control of the European Court of Justice’ (2014) 51(6) Common Market Law Review, pp. 1579–607, at 1606Google Scholar (‘The Court is not deaf to politics or policy’).

114 See Renewable Energy Directive 2018, n. 8 above, Art. 5(1). The same provision, however, does call on the EU Commission to assess the need for a mandate that Member States open their support schemes to producers located in other Member States, albeit at the exceedingly modest quotas of 5% by 2025 and 10% by 2030: ibid., Art. 5(5).

115 See, e.g., Lazard, ‘Levelized Cost of Energy Analysis: Verson 13.0’, 7 Nov. 2019, available at: https://www.lazard.com/media/451086/lazards-levelized-cost-of-energy-version-130-vf.pdf.

116 For a detailed exploration of the interplay among technology, market, and other risks from an investor perspective, see Mormann, F., ‘Enhancing the Investor Appeal of Renewable Energy’ (2012) 42(3) Environmental Law, pp. 681–734Google Scholar.

117 See, e.g., Renewable Energy Policy Network for the 21st Century, Renewables 2018 Global Status Report (REN21, 2018), p. 59 (noting the global trend toward more competitive, market-based clean energy policies).

118 ‘Guidelines on State Aid for Environmental Protection and Energy’, n. 80 above.