OPINION OF ADVOCATE GENERAL
delivered on 18 January 2017 (1)
E.ON Biofor Sverige AB
(Request for a preliminary ruling from the Förvaltningsrätten i Linköping (Sweden))
(Interpretation of Article 34 TFEU and Article 18(1) of Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources — Mass balance system aimed at identifying sustainable gas to ensure that the use of biogas complies with the sustainability criteria laid down in the directive — Company established in a Member State which imports biogas from another Member State via the network of interconnected national gas pipelines — National rules making the favourable tax treatment of biogas conditional on the achievement of the mass balance within a well-defined location, excluding the cross-border transport of biogas by gas pipeline)
1. Biogas (2) is produced in natural surroundings or industrial plants as a result of the decomposition reactions of organic material caused by certain microorganisms in anaerobic environments. Use of biogas (for example, as a biofuel for transport) is very beneficial for the environment when it comes from organic waste, (3) but it may be harmful to other interests (including the food supply for the population or biodiversity in areas of high ecological value) where it is obtained from non-residual raw materials. (4)
2. Directive 2009/28/EC (5) seeks to counter that risk by providing that, in order to rely on the scheme for energy from renewable sources, biogas used as a biofuel must comply with strict ‘sustainability criteria’. Verification of compliance with those criteria is, furthermore, subject to a method known as ‘mass balance’ (‘MB’) and it is this with which the questions submitted to the Court by the referring court are concerned.
3. In particular, this is the first time that the Court has been asked whether Article 18 of Directive 2009/28, which governs the MB method, makes it obligatory for a Member State to accept sustainable biogas imported from another Member State via the network of interconnected national gas pipelines. (6)If that is not the case, the referring court seeks to ascertain whether that provision breaches the prohibition of measures having an effect equivalent to quantitative restrictions on imports (Article 34 TFEU).
4. In order to provide a helpful reply to the questions referred for a preliminary ruling, (7) I believe that the Court should, in addition, determine whether national rules like the Swedish rules, which allow application of the MB method in the Swedish national gas pipeline network but not the cross-border network of interconnected gas pipelines, are compatible with Article 34 TFEU.
I – Legal Framework
A – EU law
1. Directive 2009/28
5. According to Article 1:
‘This Directive establishes a common framework for the promotion of energy from renewable sources. It sets mandatory national targets for the overall share of energy from renewable sources in gross final consumption of energy and for the share of energy from renewable sources in transport. ... It establishes sustainability criteria for biofuels and bioliquids.’
6. Article 2, second subparagraph, points (a), (e), (i) and (k), stipulates:
‘(a) “energy from renewable sources” means energy from renewable non-fossil sources, namely wind, solar, aerothermal, geothermal, hydrothermal and ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases;
(e) “biomass” means the biodegradable fraction of products, waste and residues from biological origin from agriculture (including vegetal and animal substances), forestry and related industries including fisheries and aquaculture, as well as the biodegradable fraction of industrial and municipal waste;
(i) “biofuels” means liquid or gaseous fuel for transport produced from biomass;
(j) “guarantee of origin” means an electronic document which has the sole function of providing proof to a final customer that a given share or quantity of energy was produced from renewable sources as required by Article 3(6) of Directive 2003/54/EC;
(k) “support scheme” means any instrument, scheme or mechanism applied by a Member State or a group of Member States, that promotes the use of energy from renewable sources by reducing the cost of that energy, increasing the price at which it can be sold, or increasing, by means of a renewable energy obligation or otherwise, the volume of such energy purchased. This includes, but is not restricted to, investment aid, tax exemptions or reductions, tax refunds, renewable energy obligation support schemes including those using green certificates, and direct price support schemes including feed-in tariffs and premium payments;
7. In accordance with Article 3:
‘1. Each Member State shall ensure that the share of energy from renewable sources, calculated in accordance with Articles 5 to 11, in gross final consumption of energy in 2020 is at least its national overall target for the share of energy from renewable sources in that year, as set out in the third column of the table in part A of Annex I. Such mandatory national overall targets are consistent with a target of at least a 20% share of energy from renewable sources in the Community’s gross final consumption of energy in 2020. In order to achieve the targets laid down in this Article more easily, each Member State shall promote and encourage energy efficiency and energy saving.
4. Each Member State shall ensure that the share of energy from renewable sources in all forms of transport in 2020 is at least 10% of the final consumption of energy in transport in that Member State.
8. As regards calculation of the share of energy from renewable sources, Article 5(1) provides as follows:
‘The gross final consumption of energy from renewable sources in each Member State shall be calculated as the sum of:
a) gross final consumption of electricity from renewable energy sources;
b) gross final consumption of energy from renewable sources for heating and cooling; and
c) final consumption of energy from renewable sources in transport.
Gas, electricity and hydrogen from renewable energy sources shall be considered only once in point (a), (b), or (c) of the first subparagraph, for calculating the share of gross final consumption of energy from renewable sources.
… biofuels and bioliquids that do not fulfil the sustainability criteria set out in Article 17(2) to (6) shall not be taken into account.’
9. As set out in recital 65:
‘Biofuel production should be sustainable. Biofuels used for compliance with the targets laid down in this Directive, and those that benefit from national support schemes, should therefore be required to fulfil sustainability criteria.’
10. Article 17 sets out the sustainability criteria, as follows:
‘1. Irrespective of whether the raw materials were cultivated inside or outside the territory of the Community, energy from biofuels and bioliquids shall be taken into account for the purposes referred to in points (a), (b) and (c) only if they fulfil the sustainability criteria set out in paragraphs 2 to 6:
a) measuring compliance with the requirements of this Directive concerning national targets;
b) measuring compliance with renewable energy obligations;
c) eligibility for financial support for the consumption of biofuels and bioliquids.
2. The greenhouse gas emission saving from the use of biofuels and bioliquids taken into account for the purposes referred to in points (a), (b) and (c) of paragraph 1 shall be at least 35%.
3. Biofuels and bioliquids taken into account for the purposes referred to in points (a), (b) and (c) of paragraph 1 shall not be made from raw material obtained from land with high biodiversity value …
4. Biofuels and bioliquids taken into account for the purposes referred to in points (a), (b) and (c) of paragraph 1 shall not be made from raw material obtained from land with high carbon stock …
5. Biofuels and bioliquids taken into account for the purposes referred to in points (a), (b) and (c) of paragraph 1 shall not be made from raw material obtained from land that was peatland in January 2008 …
6. Agricultural raw materials cultivated in the Community and used for the production of biofuels and bioliquids taken into account for the purposes referred to in points (a), (b) and (c) of paragraph 1 shall be obtained in accordance with the requirements and standards under the provisions referred to under the heading “Environment” in part A and in point 9 of Annex II to Council Regulation (EC) No 73/2009 of 19 January 2009 …
8. For the purposes referred to in points (a), (b) and (c) of paragraph 1, Member States shall not refuse to take into account, on other sustainability grounds, biofuels and bioliquids obtained in compliance with this Article.
11. In accordance with Article 18:
‘1. 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:
a) allows consignments of raw material or biofuel with differing sustainability characteristics to be mixed;
b) requires information about the sustainability characteristics and sizes of the consignments referred to in point (a) to remain assigned to the mixture; and
c) 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.
2. The Commission shall report to the European Parliament and the Council in 2010 and 2012 on the operation of the mass balance verification method described in paragraph 1 and on the potential for allowing for other verification methods in relation to some or all types of raw material, biofuel or bioliquids …
3. Member States shall take measures to ensure that economic operators submit reliable information and make available to the Member State, on request, the data that were used to develop the information. Member States shall require economic operators to arrange for an adequate standard of independent auditing of the information submitted, and to provide evidence that this has been done. The auditing shall verify that the systems used by economic operators are accurate, reliable and protected against fraud. It shall evaluate the frequency and methodology of sampling and the robustness of the data.
The information referred to in the first subparagraph shall include in particular information on compliance with the sustainability criteria set out in Article 17(2) to (5), appropriate and relevant information on measures taken for soil, water and air protection, the restoration of degraded land, the avoidance of excessive water consumption in areas where water is scarce and appropriate and relevant information concerning measures taken in order to take into account the issues referred to in the second subparagraph of Article 17(7).
4. The Community shall endeavour to conclude bilateral or multilateral agreements with third countries containing provisions on sustainability criteria that correspond to those of this Directive. Where the Community has concluded agreements containing provisions relating to matters covered by the sustainability criteria set out in Article 17(2) to (5), the Commission may decide that those agreements demonstrate that biofuels and bioliquids produced from raw materials cultivated in those countries comply with the sustainability criteria in question …
The Commission may decide that voluntary national or international schemes setting standards for the production of biomass products contain accurate data for the purposes of Article 17(2) or demonstrate that consignments of biofuel comply with the sustainability criteria set out in Article 17(3) to (5). …
5. The Commission shall adopt decisions under paragraph 4 only if the agreement or scheme in question meets adequate standards of reliability, transparency and independent auditing. …
6. Decisions under paragraph 4 shall be adopted in accordance with the advisory procedure referred to in Article 25(3). Such decisions shall be valid for a period of no more than five years.
7. When an economic operator provides proof or data obtained in accordance with an agreement or scheme that has been the subject of a decision pursuant to paragraph 4, to the extent covered by that decision, a Member State shall not require the supplier to provide further evidence of compliance with the sustainability criteria set out in Article 17(2) to (5) nor information on measures referred to in the second subparagraph of paragraph 3 of this Article.
12. As set out in recital 94:
‘Since the measures provided for in Articles 17 to 19 also have an effect on the functioning of the internal market by harmonising the sustainability criteria for biofuels and bioliquids for the target accounting purposes under this Directive, and thus facilitate, in accordance with Article 17(8), trade between Member States in biofuels and bioliquids which comply with those conditions, they are based on Article 95 of the Treaty.’
B – National law
13. Directive 2009/28 was transposed into Swedish law by the Law (2010:598) on sustainability criteria for biofuels and bioliquids, (8) implemented by the Rules (2011:1088) on sustainability criteria for biofuels and bioliquids. (9) Both were supplemented by the provisions of the Statens Energimyndighet (Swedish National Energy Agency; ‘Energy Agency’) on sustainability criteria for biofuels and bioliquids. (10)
14. Paragraph 1(a) of Chapter 3 of Law 2010/598 sets out a number of additional qualifications regarding the procedure for verification of the sustainability of biofuels. It provides inter alia that the reportable person must guarantee, with the assistance of a verification system, that biofuels will be sustainable, for which purpose that person will conclude agreements with operators from the whole chain of production and will take samples at his facilities. The verification system must be supervised by an independent monitor who will check whether it is accurate, reliable and fraud-proof. The supervision will also entail an assessment of the sampling method and of the frequency with which samples are taken and will involve an evaluation of the data supplied by the reportable person in relation to his verification system; the independent monitor will draw up a certificate setting out his opinion on that system. The government, or the authority designated by the government, may adopt supplementary measures concerning the verification system and the monitoring of that system.
15. According to Paragraph 14 of Rules 2011/1088, the system for verification of the sustainability of biofuels is the MB system, under identical conditions to those set out in Article 18(1) of Directive 2009/28. The Energy Agency may adopt additional measures concerning the verification system and the monitoring of that system.
16. The Energy Agency relied on that authorisation to adopt the STEMFS 2011/2. Paragraph 2 of Chapter 3 provides that the reportable person is required to guarantee through his verification system that the biofuels will be traceable from the place of cultivation, creation or collection of the raw materials to consumption of the fuel or to the time when the tax becomes payable.
17. Pursuant to Paragraph 3 of Chapter 3 of the STEMFS 2011/2:
‘Under Paragraph 14, first section, point 3, of the hållbarhetsförordningen, the mass balance shall be achieved within a location with a clear boundary and shall be satisfied within a period suited to the chain of production.
A reportable person’s entire tax warehouse under the Law (1994:1766) on tax on energy (lagen (1994:1766) om skatt på energi) can constitute a location under the first paragraph.’
II – The national proceedings and the questions referred for a preliminary ruling
18. E.ON Biofor Sverige AB (‘E.ON Biofor’) purchases sustainable biogas from a sister company in Germany and sends it to Sweden via Denmark, while retaining ownership of the gas at all stages. According to the account of the facts, the German company adds biogas at a clearly defined point of the German gas network, which is the place where ownership is transferred to the Swedish company E.ON Biofor, which then takes an amount out of the gas network at a similarly unambiguous and clearly defined point (the border point between the German and Danish gas networks). The gas then leaves the Danish network in Dragör and joins the Swedish network.
19. Each addition to and removal from a national gas network is the responsibility of a single operator, who must hold a delivery or purchase contract at a border point so that the same volumes cannot be sold or purchased twice, since that would create an imbalance in the system. Each consignment which is delivered in its entirety to the border point between the national gas pipeline networks is accompanied by a REDCert DE certificate of sustainability, issued in conformity with the German national system for application of the MB method. The certificate guarantees that the biogas which has been transported and added satisfies the sustainability criteria and has not been sold to a third party. That certificate can be obtained only once and is delivered directly to the Swedish company E.ON Biofor by its German namesake.
20. In accordance with Paragraph 3 of the STEMFS 2011/2, the Energy Agency gave E.ON Biofor notice, on 3 September 2013, that it must make changes to its system for verification of biogas sustainability in order to ensure that the MB was achieved within ‘a location with clear boundaries’.
21. The Energy Agency considers that it is possible, while retaining the characteristics of sustainability, to inject sustainable biogas into the Swedish gas network and to sell the corresponding amount, classified as sustainable, anywhere in Sweden, even though it is not physically the same gas. However, in the formal notice sent to E.ON Biofor, the Energy Agency stated that the same principle cannot apply beyond national borders.
22. The Energy Agency submits that the reason why the import of biogas via the natural gas network does not satisfy the requirement of the MB method is that that method is not applied within ‘a location with a clear boundary’, as stipulated by Paragraph 3 of Chapter 3 of the STEMFS 2011/2. Accordingly, the biogas which E.ON Biofor imported to Sweden could not be included in its system for verification of sustainability. (11)
23. E.ON Biofor brought an action before the referring court against the Energy Agency’s decision, seeking the annulment of point 4 of the notice; the Energy Agency contested that action.
24. In the light of the conflicting arguments, the Förvaltningsrätten i Linköping (Administrative Court, Linköping, Sweden) stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling:
‘1) Are the terms “mass balance” and “mixture” in Article 18(1) of Directive 2009/28 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?
2) 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?’
25. Written observations were submitted by the two parties to the main proceedings, the European Parliament, the Council, the Commission and the Netherlands and Estonian governments. E.ON Biofor, the Energy Agency and the three EU institutions presented oral argument at the hearing, which was held on 26 October 2016.
III – The parties’ observations
A – The first question
26. The European Parliament, the Council and the Commission submit that Article 18(1) of Directive 2009/28 merely requires the use of the MB method as a technical procedure for verifying compliance with the biogas sustainability criteria. That provision simply sets out minimum conditions which the Member States must establish when applying the MB method. Those conditions do not include any type of geographical limitation, from which it follows that the Member States are free to decide whether or not to provide for application of the MB method to intra-Community biogas transactions carried out via the network of interconnected national gas pipelines.
27. Those EU institutions contend that Article 18(1) is neutral with regard to intra-Community trade in biogas, a subject area which it does not govern. In the Commission’s submission, Directive 2009/28 contains no free movement clause requiring the Member State to market as sustainable biogas that which was lawfully sold under that classification in other Member States.
28. Accordingly, the European Parliament, the Council and the Commission contend that Article 18(1) of Directive 2009/28 cannot be interpreted as compelling Member States to accept the marketing as sustainable biogas of biogas imported from other Member States via the network of interconnected national gas pipelines.
29. The Netherlands Government supports that view but also states that since Sweden accepts that it is possible to use the MB procedure in its national gas pipeline network, it must also accept it in relation to imports of biogas from other Member States. In the Netherlands Government’s submission, that conclusion is justified, moreover, by the existence of voluntary national and international systems which the Commission approves under Article 18(4) of Directive 2009/28 and which promote cross-border trade in biogas.
30. E.ON Biofor submits that Article 18(1) of Directive 2009/28 precludes national legislation which prohibits biogas imported from another Member State via gas pipelines from being marketed as sustainable, where that import satisfies the conditions laid down for use of the MB system.
31. E.ON Biofor contends that imports from Germany to Sweden satisfy those conditions in this case. Gas with different sustainability characteristics is mixed in the gas pipeline network and the physical connection between production and consumption is guaranteed, since injections and withdrawals of biogas are carried out within the network of interconnected national pipelines, which is a physical space with clear boundaries.
32. E.ON Biofor further contends that the certificates it submits enable the Energy Authority to verify that the sum of all the consignments which it withdraws from the mixture in Sweden have the same sustainability characteristics as the consignments injected into that mixture in Germany.
33. E.ON Biofor submits that its interpretation is consistent with the aims of the EU legislature, for the transport of biogas by gas pipeline creates less pollution and is less expensive than transport by road, ship or rail. Cross-border trade promotes the consumption of biogas with positive effects for the reduction of greenhouse gases sought by Directive 2009/28. On the other hand, rejection of the MB method in intra-Community trade via gas pipelines would increase the costs of transporting biogas.
34. The Estonian Government and the Energy Agency put forward the opposite view. They argue that Article 18(1) of Directive 2009/28 is not aimed at harmonising trade in biogas in the EU and that, therefore, it cannot be interpreted as imposing on the Member States the obligation to accept the application of the MB method for biogas imported via the interconnected gas network.
35. The Energy Agency submits that the MB method requires monitoring of the traceability of biogas from production to consumption, which must take place in a ‘well defined location’ where the supervisory authority is able to verify the sustainability of consignments of biogas added to and withdrawn from the mixture. That supervision is not feasible within the interconnected network of national gas pipelines in the absence of an EU authority to monitor it. To allow the application of the MB method in that situation would in fact be tantamount to accepting the use of a tradable certificate scheme (book and claim).
B – The second question
36. As regards the validity of Article 18(1) of Directive 2009/28, the European Parliament and the Council submit that that provision does not constitute a restriction of intra-Community trade in biogas and that, therefore, it is not contrary to the prohibition of measures having an effect equivalent to [restrictions on] imports (Article 34 TFEU). The Parliament and the Council further submit that if Article 18(1) did create such restrictions, these would be justified by the imperative requirement of protection of the environment and would respect the principle of proportionality.
37. The Commission and the Estonian Government maintain that use of the MB method creates a barrier to intra-Community trade in biogas which is, in principle, contrary to Article 34 TFEU but is justified by the need to protect the environment. The EU legislature did not exercise its discretion disproportionately when it chose the MB as the method for monitoring biogas sustainability. The Energy Agency, which also takes that position, relies as an additional argument on the need to guarantee the supply of energy.
38. However, E.ON Biofor submits that Article 18(1) of Directive 2009/28 would be contrary to Article 34 TFEU if it were construed as carrying out an exhaustive harmonisation and as not guaranteeing the free intra-Community movement of sustainable biogas through gas pipelines. E.ON Biofor further submits that the Swedish measure, which consists of permitting the MB method for biogas of Swedish origin within the national gas pipeline network and prohibiting that method for biogas imported through the network of interconnected national gas pipelines, breaches Article 34 TFEU. E.ON Biofor contends that that restriction is discriminatory and is not justified by the requirement of protection of the environment or by the need for security of the energy supply, for it does not comply with the principle of proportionality.
IV – Analysis of the questions
39. Since the request for a preliminary ruling asks for an interpretation of the terms ‘mass balance’ and ‘mixture’, used in Article 18(1) of Directive 2009/28, and a decision on whether that provision is compatible with Article 34 TFEU, I believe that it is essential to make a number of preliminary remarks about those terms.
40. Article 18(1) of Directive 2009/28 stipulates that the MB method must be used to verify whether the sustainability criteria laid down in Article 17(2) to (6) of the directive, with which biogas must comply in order to be classified as a sustainable biofuel, have been fulfilled.
41. That classification or ‘green label’ is a sine qua non in order for the biofuel to be taken into account for the purposes of: a) evaluating compliance by the Member States with their obligation to reduce greenhouse gas emissions; b) evaluating compliance with obligations regarding the use of renewable energy; and c) eligibility for the various types of assistance created by Member States to promote the consumption of renewable energy.
42. The rationale for the sustainability criteria in Article 17(2) to (6) of Directive 2009/28 is to prevent areas having a high ecological value (12) from being used for the production of biomass to make biofuels. The raw materials used in the production of biogas must also satisfy the environmental requirements laid down in EU agricultural legislation. (13) The biogas sustainability criteria comply specifically with both objectives.
43. Directive 2009/28 carried out an exhaustive harmonisation of the sustainability criteria for biogas, meaning that the Member States may not set other, additional criteria, in accordance with Article 17(8), or cease applying any of those laid down in Article 17 of Directive 2009/28. (14)
44. As is logical, it is necessary to establish whether the biogas placed on the market fulfils the sustainability criteria, for which purpose there are a number of techniques and procedures, of which Directive 2009/28 chose the MB method. That choice involved rejecting:
– The identity preservation method, which prohibits the mixing of biofuels with other biofuels or other types of fuel, since it requires biofuel to remain strictly segregated and to be identifiable from the production stage to the consumption stage. The EU legislature did not adopt this method because of the high administrative and transport costs involved. (15)
– The tradable certificate (book and claim) method, (16) which enables suppliers to demonstrate that the batch of fuel they are placing on the market was obtained from renewable sources. With this method there is no direct connection between the biofuel placed on the market and production of that biofuel from biomass which fulfils the sustainability criteria, meaning that economic operators do not need to demonstrate any traceability and their administrative costs will be minimal.
45. As I said, the EU legislature decided to impose the MB method as an intermediate option between the two mentioned above, because, while it allows the mixing of different biofuels for the purposes of placing those fuels on the market, it guarantees their traceability from source to consumption. The MB method requires the seller to hold documents certifying that an amount of biofuel identical to that withdrawn from the distribution network was injected into that network after being obtained in accordance with the sustainability criteria laid down in Article 17(2) to (6) of Directive 2009/28. The administrative costs of applying the MB method are higher than those involved in the tradable certificate method but it is more effective at promoting the production of biofuel. (17)
46. According to recital 76 in the preamble to Directive 2009/28, the Commission should review other procedures for verification of biofuels and report (Article 18(2)) to the European Parliament and the Council in 2010 and 2012 on the operation of the MB method and on the potential for allowing for other methods. The Commission’s report concluded that the MB method continued to be the most suitable. (18)
47. In my opinion, Article 18(1) of Directive 2009/28 partially harmonises the manner in which the MB method should be applied, (19) and, at all events, it stipulates three conditions, namely:
– It must allow consignments of raw material or biofuel with differing sustainability characteristics to be mixed.
– It must require information about the sustainability characteristics and sizes of the consignments of biofuel to remain assigned to the mixture.
– It must provide 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.
48. Based on that partial harmonisation, Directive 2009/28 permits the implementation of the MB method by means of one of the following:
– A national scheme established by the competent authority of each Member State, in accordance with Article 18(3) of Directive 2009/28.
– Voluntary national or international schemes recognised by the Commission, in accordance with the conditions laid down in Article 18(4) and (5) of Directive 2009/28.
– An international scheme provided for in a bilateral or multilateral agreement concluded by the Union with third countries and which the Commission has recognised for the purpose.
49. At present, the EU has not concluded any agreements with third countries and the MB method is applied either through the national schemes (like the Swedish scheme in this case) or through the 19 voluntary schemes which the Commission has approved to date. (20)
A – The first question: interpretation of Article 18(1) of Directive 2009/28
50. In its first question, the referring court asks whether, in providing for use of the MB method, Article 18(1) of Directive 2009/28 imposes an obligation to accept trade in biogas between Member States via an interconnected gas network.
51. The factor which gave rise to the dispute is, as stated, the requirement that the MB must be achieved within a ‘location with clear boundaries’ in Sweden, which is why the Energy Agency notified E.ON Biofor that the network of interconnected national gas pipelines did not satisfy that requirement.
52. In fact, Article 18(1) of Directive 2009/28 does not include within the MB requirements the need for the MB to be achieved within a location with clearly defined boundaries. The reference to ‘location’ appears in the Communication of the Commission of 2010 which, when describing the different forms which mixtures of biofuels may take, refers to ‘any form where consignments would … be in contact, such as in a container, processing or logistical facility or site (defined as a geographical location with precise boundaries within which products can be mixed).’ (21)
53. That statement by the Commission does not suggest that there are any conditions relating to use of the MB method additional to those set out in Article 18(1) of Directive 2008/29. Therefore, biogases with differing levels of sustainability and biogases containing gas from fossil fuels may be mixed and the mixture must be made in a geographical location which enables this (container, treatment or logistical facility, gas pipelines, etc.).
54. Since Article 18(1) of Directive 2008/29 sets out only the basic technical conditions for application of the MB method, to which I referred above, (22) its effect on intra-Community trade in biogas via gas pipelines is neutral. I agree with the Commission, the Council and the Parliament that the provision neither requires nor prohibits the application of that method in cross-border biogas transactions.
55. It is for the Member States to set the rules governing the MB method in order to provide further detail about its application, while ensuring compliance with the conditions laid down in Article 18(1) of Directive 2009/28. They may therefore provide that the MB is to be achieved at production plants, within the national gas pipeline network (as approved by Sweden, Germany and the Netherlands) or within an interconnected network of national pipelines, provided that it is possible to guarantee the chain of custody and the traceability of biogas.
56. Full harmonisation of the sustainability criteria, the requirement for use of the MB method to verify that biogas satisfies those criteria and partial harmonisation of the technical conditions for use of the MB method undoubtedly promote intra-Community trade in that biofuel. Recital 94 in the preamble to Directive 2009/28 refers specifically to the harmonising aim of Articles 17 and 18, stipulating that the legal basis for their adoption is Article 95 TEC (Article 114 TFEU) and that those articles seek to ‘facilitate … trade between Member States in biofuels and bioliquids ...’
57. As the Commission stated in its observations, Directive 2009/28 does not contain a clause providing for unconditional movement of biogas between the Member States, and the Member States may establish different schemes for application of the MB method which create restrictions on the intra-Community trade in sustainable biogas. Full harmonisation of the conditions for use of the MB method would have been necessary to ensure that all the national schemes were similar and thus to guarantee the free movement of biogas lawfully marketed under any of those schemes.
58. In the absence of such full harmonisation, operators may only secure cross-border free movement of biogas by recourse to the voluntary verification schemes authorised by the Commission in accordance with Article 18(4) of Directive 2009/28. In that connection, the Energy Agency acknowledges that it has no objection to accepting sustainable biogas imported under any of those certificates, (23) provided that they cover cross-border trade, as is the case of the International Sustainability and Carbon Certification (ISCC), REDcert EU and NTA 8080 schemes. (24)
59. Accordingly, I suggest that the Court should reply to the first question referred for a preliminary ruling, stating that the interpretation of the terms ‘mass balance’ and ‘mixture’ in Article 18(1) of Directive 2009/28 neither prohibits nor requires the unconditional acceptance by Member States of trade in sustainable biogas via an interconnected network of national gas pipelines.
B – The second question: compatibility of Article 18(1) of Directive 2009/28 with Article 34 TFEU
60. The referring court asks the Court whether, if the answer to the first question is in the negative, Article 18(1) of Directive 2009/28 is compatible with Article 34 TFEU, which prohibits measures having effects equivalent to quantitative restrictions on imports.
61. According to settled case-law of the Court, the prohibition laid down in Article 34 TFEU ‘applies not only to national measures but also to measures adopted by the institutions of the European Union’, meaning that provisions of secondary law must also comply with that prohibition. (25)
62. That prohibition is imposed less strictly on the EU institutions than on the Member States (26) because the Court grants the former a wide discretion to exercise their harmonising powers in relation to the production and marketing of goods. The institutions may, therefore, adopt provisions which temporarily maintain obstacles to intra-Community trade as a prior step to their definitive abolition. (27)
63. The imposition of the MB method for verification of compliance with the sustainability criteria for biogas, in accordance with Article 18(1) of Directive 2009/28, creates a certain barrier to intra-Community trade in that product, in that it requires economic operators to bear additional administrative and financial burdens which would not exist if the tradable certificates method (or indeed full deregulation, which would have allowed economic operators complete freedom to establish the sustainability of their biogas by other methods) had been chosen.
64. Further, as I pointed out above, partial harmonisation of Article 18(1) of Directive 2009/28, as regards the MB method, opens up the possibility for Member States to establish differing schemes for use of that method, meaning that biogas regarded as sustainable under one national scheme may not be so regarded in another Member State. Full harmonisation would have avoided the emergence of those technical impediments and ensured that, where sustainable biogas was lawfully produced and placed on the market in a Member State, it could enter other Member States and be distributed there under that same ‘label’.
65. The restrictions of intra-Community trade derived from use of the MB method (and which are possibly contrary to the prohibition in Article 34 TFEU) may be justified by the imperative requirement for protection of the environment and must comply with the principle of proportionality. The considerations which I shall set out below on the national provision pursuant to which MB must be achieved in a location with clear boundaries within Sweden may be applied here with the distinction that the rules laid down in Article 18 of Directive 2008/29 apply generally to all the Member States without any element of discrimination or protectionism which would infringe the principle of proportionality.
66. Moreover, although Article 18(1) of Directive 2009/28 constitutes a temporal restriction of intra-Community trade in biogas, it also promotes the development of that trade in the long term, which, in accordance with the case-law of the Court cited above, precludes it from being classified as a measure having equivalent effect, contrary to Article 34 TFEU. A number of reasons support that conclusion.
67. First, the MB method creates fewer difficulties for intra-Community trade than the identity preservation method, as I stated above, (28) and it also enables the traceability of sustainable biogas to be monitored.
68. Second, Article 18(4) of Directive 2009/28 allows operators to use voluntary national and international schemes for application of the MB system, provided those schemes are recognised by the Commission. Such voluntary schemes may be used in domestic trade within a country and in intra-Community trade. By using voluntary schemes, operators have a guarantee, under Article 18(7) of the directive, (29) that biogas which has been certified as sustainable by means of an MB method under such a scheme will be able to be placed on the market in another Member State on the same terms as biogas from a national source which has been verified using an MB method under the national scheme.
69. Third, Article 18(9) of Directive 2008/29 provides for the possibility of replacing the MB method in the future with another method which is less restrictive of intra-Community trade, such as the tradable certificate method. That provision shows that the MB method is the first step in the promotion of intra-Community trade in biogas, even though it temporarily keeps in place certain obstacles which may be rectified at a later date.
70. Accordingly, since the choice of the MB method, as it has been implemented, was the result of an assessment of a number of clearly complex (economic and technical) factors and I do not perceive it to be a measure that is manifestly inappropriate in relation to the aim pursued, there are no grounds to find that Article 18(1) of Directive 2009/28 infringes Article 34 TFEU.
C – The compatibility of the Swedish legislation with Article 34 TFEU
71. The Court has held that, where a matter has been the subject of exhaustive harmonisation at EU level, any national measure relating thereto must be assessed in the light of the provisions of that harmonising measure and not in the light of primary law. (30) However, any national provision which transposes into national law a directive providing for non-exhaustive harmonisation must be compatible with primary law. (31)
72. Since Article 18(1) of Directive 2009/28 harmonises only partially and not exhaustively the use of the MB method for verifying whether biogas is sustainable, the Swedish national scheme must be analysed in the light of Article 34 TFEU.
73. More specifically, it is a question of determining whether the condition that the MB must be achieved in a location with clear boundaries, such as the Swedish gas pipeline network, but not in the interconnected network of national gas pipelines, is a measure having an effect equivalent to a quantitative restriction on imports, prohibited by Article 34 TFEU. Although the referring court does not ask that question directly, I believe that it is necessary to address it so that the Court’s reply is helpful for resolving the main proceedings.
74. According to settled case-law, in prohibiting between Member States measures having equivalent effect to quantitative restrictions on imports, Article 34 TFEU covers any national measure capable of hindering, directly or indirectly, actually or potentially, intra-Community trade. (32)
75. Since the measure adopted by the Energy Agency is applicable without distinction to all sustainable biogas placed on the market in Sweden, regardless of its origin, it precludes the MB of imported gas from being achieved in the interconnected network of national gas pipelines, meaning that it impedes or hinders imports of biogas from other Member States via that network.
76. Since biogas lawfully produced and marketed in Germany, which in principle satisfies the sustainability criteria set out in Article 17 of Directive 2009/28, cannot enter Sweden as sustainable biogas if it circulates through a gas pipeline, the national measure restricts imports and is, therefore, contrary to Article 34 TFEU. Although, as the Energy Agency submits, it could be distributed as non-sustainable biogas, the return for the economic operator would be reduced since only sustainable biogas is eligible for favourable tax arrangements which make it competitive as against fossil fuels.
77. The Energy Agency submits that the Swedish provision does not preclude cross-border trade in sustainable biogas, which operators may import from other Member States via gas pipeline using one of the voluntary schemes approved by the Commission in accordance with Article 18(4) of Directive 2009/28. (33) The Energy Agency further submits that operators may also transport biogas by road, rail or ship and then inject that imported biogas into the Swedish gas pipeline network.
78. Neither of the two arguments appears to me to be sufficient to counter the restrictive effect of the measure. Admittedly, biogas could be liquefied and exported to Sweden by land, sea or rail, while retaining its characteristics, and the identity preservation method could be applied to it to verify its sustainability, but, as E.ON Biofor has pointed out, those means of transport, which differ from gas pipelines, significantly increase the final price, thereby precluding, de facto, the import of the gas to Sweden, since it would not be competitive with biogas of Swedish origin. (34)
79. Use of a voluntary scheme for application of the MB method is the only way of exporting sustainable biogas to Sweden for economic operators from other Member States, while Swedish biogas producers may use one of those voluntary schemes or the Swedish national scheme, which might be more favourable to them. E.ON Biofor used the German national scheme, REDCert DE, to establish the sustainability of its biogas and, as it stated at the hearing, use of a voluntary MB verification scheme approved by the Commission, such as REDCert EU, would result in its incurring additional costs.
80. However, the obstacle to imports of biogas from other Member States via the gas pipeline network may be justified on one of the public interest grounds listed in Article 36 TFEU or by overriding requirements. The Court has accepted that national legislation or a national practice that constitutes a measure having equivalent effect to quantitative restrictions on imports may be covered by those reasons or requirements. In either case, the national provision must, in accordance with the principle of proportionality, be appropriate for ensuring attainment of the objective pursued and must not go beyond what is necessary in order to attain it. (35)
81. The measure adopted by the Energy Agency facilitates use of the MB method by Swedish biogas producers by allowing them to mix biogas in the national gas pipeline network and to apply the MB method, which is less restrictive than requiring them to use that method in every production plant. Accordingly, it promotes the use of that renewable energy and, from that perspective, may be covered by environmental protection (36) and, more specifically, the promotion of biogas as renewable energy, (37) which contributes to the reduction in emissions of greenhouse gases, one of the main causes of climate change which the Union and its Member States have pledged to combat. (38) The Swedish measure also assists in guaranteeing the supply of energy, for it helps to meet the demand for biogas for transport, an aim of the Swedish tax incentive scheme.
82. In furthering protection of the environment, the promotion of renewable energy in general and of biogas in particular, the measure also contributes indirectly to the protection of the health and life of humans, animals or plants, which are among the public interest grounds listed in Article 36 TFEU. (39)
83. The Swedish Energy Agency’s decision must comply with the principle of proportionality, which means that it must be appropriate for securing the attainment of the aim pursued and must not go beyond what is necessary for doing so.
84. I do not believe that the limitation of the MB method to the Swedish gas pipeline network, to the exclusion of the interconnected network of national pipelines of the Member States, is strictly necessary for promoting the use of sustainable biogas in Sweden. Rather, it makes it de facto impossible to import into Sweden biogas from other Member States, when those imports increase the supply of biogas and are conducive to greater use of that biofuel.
85. I can find no sufficient grounds for Sweden to prohibit operators who wish to do so from importing sustainable biogas, which has been verified by the MB method, via the network of interconnected pipelines of the Member States, provided that they are able to establish, in a manner equivalent to the method of Swedish producers, that the sustainability of their biogas is guaranteed in accordance with Article 18 of Directive 2009/28 and their national scheme for application of the MB method. That argument is bolstered by the fact that the Commission may adopt a decision in which it concludes that a national scheme for application of the MB method (which has been notified to it) entails automatic mutual recognition, like the voluntary schemes. (40)
86. The Swedish Energy Agency attempts to rely as justification for its conduct on the lack of a European supervisory authority for the network of national gas pipelines, with the ability to monitor the application of the MB method in order to guarantee traceability of consignments of sustainable biogas traded at intra-Community level while also preventing operators from benefitting from more than one type of assistance for the production or marketing of such biogas. At the hearing, the Energy Agency stressed that it was impossible to verify the chain of custody of biogas imported from Germany to Sweden because it was unable to supervise biogas producers in Germany.
87. I do not find that argument acceptable because Article 18(4) of Directive 2009/28 permits the free movement of sustainable biogas via gas pipelines where its traceability is safeguarded under voluntary schemes approved by the Commission. Where an operator establishes, under the national scheme of the State of production, that the MB has been achieved for a consignment of sustainable biogas imported from a Member State via gas pipelines, the Swedish authorities must accept the importation of that biogas and not prohibit it from being transported through the Swedish gas pipeline network.
88. Partial harmonisation of use of the MB method, governed by Article 18(1) and (3) of Directive 2009/28, must permit the mutual recognition of sustainable biogas obtained in the Member States unless Member States succeed in establishing that there is an overriding requirement which justifies its rejection. The Swedish Energy Agency has not put forward sufficient arguments to rebut that presumption that mutual recognition should be applied to biogas which has been lawfully produced and marketed as sustainable in Germany and is then exported to Sweden via pipelines.
89. Sweden could have allowed economic operators to establish the sustainability of their biogas by means of the information required under the MB scheme in their State of origin. That option is less restrictive of intra-Community trade than the de facto prohibition of imports via gas pipelines. In fact, as it admitted at the hearing, the Energy Agency monitors the sustainability of biogas through the examination of the documents presented to it by national operators. I do not understand why it cannot apply the same approach to importers of biogas who provide reliable national certificates attesting to the sustainability of their biogas.
90. Therefore, in my opinion, the contested measure does not comply with the principle of proportionality. In any event, it is for the Energy Agency (and any court seised of an action against its decisions) to determine whether the evidence adduced by E.ON Biofor is sufficient to establish that the imported consignments of biogas satisfy the sustainability criteria laid down in Directive 2009/28, that the conditions relating to the MB method have been complied with, and that there is no risk of double counting of those consignments in Germany and in Sweden, despite the fact that they have been transported through the network of interconnected national pipelines.
D – The Energy Agency measure as a national support scheme
91. Lastly, in the alternative and only in the event that the questions submitted by the referring court are approached from the point of view of the restrictions allowed in ‘national support schemes’ for the production of biogas, within the meaning of Article 2(k) of Directive 2009/28, I should like to point out that the limitation of the MB method to biogas which circulates through Swedish pipelines, thereby excluding gas from the interconnected network of national pipelines, does not come under any of those schemes. Nor is it comparable to the national support schemes for the production of green electricity examined by the Court in Ålands Vindkraft. (41)
92. Although the order for reference does not expressly address the matter, (42) it appears to suggest (and the Energy Agency confirmed that this was the case at the hearing) that the favourable tax treatment applies to all sustainable biogas, not only that of Swedish origin, from which it follows that biogas imported under voluntary MB schemes is also eligible for that treatment . (43)
93. The Court has accepted that Member States may adopt discriminatory measures to support green energy and confine them to green energy originating in their territory. (44) In my view, that case-law, some aspects of which have been criticised, (45) cannot be extrapolated to the instant case. The first reason is, as I have said, that the case does not concern a national support scheme for biogas production. Secondly, in the production of and trade in green electricity, traceability is very difficult to maintain (which explains the use of tradable certificates) whereas the traceability of biogas is feasible and is ensured through Directive 2009/28, specifically by means of the MB method. Lastly, the Court has found that certain national discriminatory measures (such as the application of preferential tariffs only for the transport of green energy originating in a particular region) are contrary to Article 34 TFEU and are not justified. (46)
94. In summary, I believe that a national measure which requires application of the MB method in a location with clear boundaries, such as the national gas pipeline network, and excludes biogas verified using that method which comes from the interconnected network of national gas pipelines, constitutes a measure having an effect equivalent to a quantitative restriction on imports, contrary to Article 34 TFEU.
V – Conclusion
95. In the light of the foregoing considerations, I propose that the Court reply as follows to the questions referred for a preliminary ruling by the Förvaltningsrätten i Linköping (Administrative Court, Linköping):
‘1) In using the terms ‘mass balance’ and ‘mixture’, Article 18(1) of Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC neither prohibits nor requires the unconditional acceptance by Member States of trade in biogas via a network of interconnected national gas pipelines.
2) There are no grounds on which to declare that Article 18(1) of Directive 2009/28 infringes Article 34 TFEU.
3) A national measure which requires application of the MB method in a location with clear boundaries, such as the national gas pipeline network, and excludes biogas verified using that method which comes from the interconnected network of national gas pipelines, constitutes a measure having an effect equivalent to a quantitative restriction on imports, contrary to Article 34 TFEU.’