Posts Tagged Externalities

Essent 2.0. The CJEU surprisingly does distinguish. Support for renewable, ‘green’ energy not entirely carte blanche.

Excuse the attempt at pun in the title (which readers may have even missed. ‘Green’ v carte ‘Blanche’. It’s Thursday, and these are busy weeks). Apologies also to the readers who are new to the debate. The legality of support schemes for renewable energy  EU law has occupied mine and others’ mind for a little while now. One may want to refer eg to my paper on the Vindkraft et al judgment or to various postings on this blog. Specifically, for the latter, my post on the AG’s Opinion in Essent 2.0, case C-492/14., judgment issued today.

Bot AG had opined, very very reluctantly, that the Court’s case-law meant that Flanders could indeed reserve the benefit of the free distribution of electricity produced from renewable energy sources solely to generating installations directly connected to the distribution systems located in Flanders, thereby excluding generating installations located in other Member States.

The Court itself has now distinguished its own case-law: the EU has not harmonised the national support schemes for green electricity; this means that it is possible in principle for Member States to limit access to such schemes to green electricity production located in their territory. However the Court’s sympathy is now limited to schemes that support producers only. Green energy support schemes, whose production costs seem to be still quite high as compared with the costs of electricity produced from non-renewable energy sources, are inherently designed in particular to foster, from a long-term perspective, investment in new installations, by giving producers certain guarantees about the future marketing of their green electricity (at 110, with reference to Vindkraft).

However it is not the purpose of the Flemish scheme to give direct support to producers of green electricity. Rather, the free distribution of green electricity constitutes a financial advantage conferred primarily on the supplier of such electricity, which may, in certain circumstances, depending notably on the sale price which the consumer is charged by the supplier for his electricity, to a certain extent and indirectly also benefit the consumer (at 112).

Such a support mechanism offers no certainty that the economic advantage thus obtained for suppliers will ultimately actually and essentially be required to benefit producers of green electricity, particularly the smallest local generating installations which the Flemish Region claims to have wanted to support, which are not both producers and suppliers (at 113).

The Court is not game to assist the AG with his call for an explicit recognition of the potential to use discriminatory measures within the context of mandatory requirements (the implications of Cassis de Dijon). That is a pity, but not a surprise.

Overall, the Court’s judgment is a welcome safeguard to its more open-ended sympathy for renewable energy support schemes. Those who challenge such schemes in future, know what to do. They need to show that there is no certainty that the economic advantage obtained for suppliers will ultimately actually and essentially be required to benefit producers of green electricity, as opposed to distributors or consumers.

Next-up: a reversal of T-351/02 Deutsche Bahn?

Geert.

 

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The ‘compact’ – A new phase in international regulatory co-operation or a way around GSP+ accusations?

Update 25 October 2017. The PCIA has accepted to review the complaint brought under a related instrument, the Bangladesh Accord between trade unions and fashion chains.

wIn response to the tragedy at the Rana Plaza factory, the EU, Bangladesh and the International Labour Organisation together launched the ‘Global Sustainability Compact’ early July. The full title of the Initiative is the “Compact for Continuous Improvements in Labour Rights and Factory Safety in the Ready-Made Garment and Knitwear Industry in Bangladesh”. According to the official EU statement upon release of the initiative, key considerations are:

  • Reforming the Bangladesh Labour Law to strengthen workers’ rights, in particular regarding freedom of association and the right to collective bargaining, and to improve occupational health and safety. A new Labour Law should be in place by the end of 2013. The ILO will monitor the effective enforcement of the new legislation.
  • Recruiting 200 additional inspectors by the end of 2013, as part of the efforts to ensure regular visits to factories and assess them in terms of working conditions, including occupational safety and health, and compliance with labour laws.
  • Improving building and fire safety, especially structural safety of buildings and fire safety in ready-made garment factories, by June 2014. The ILO will help to coordinate efforts and mobilise technical resources.

The initiative is said to be ‘non-binding’, whence presumably the countries resorted to the name ‘Compact’ – a new entry I believe in the dictionary of international law (policy?) instruments [there is of course the UN Global Compact, however that does not have State involvement]. The use of co-operation and partnership is said to be the ‘carrot’ as an alternative to the ‘stick’: the latter would be to remove GSP and GSP+ treatment to Bangladeshi import into the EU. GSP and GSP+ require developing countries to sign up to, and implement, a number of international conventions in a variety of areas, so as to enjoy preferential access to the EU (the US and other countries employ similar instruments).  Its use is not uncontroversial.

I would have thought that withdrawal of GSP treatment by the EU would have been a little bit crass, given the role of companies (and consumers) here in seeking cheap garments, the price of which, frankly, just cannot be right.

As often, follow-up of this new partnership will be of the essence.

Geert.

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Let them stop eating pollution – The European ban on beaching of EU ships

When teaching International Environmental Law, I tend to at some point in the proceedings have the students ponder Lawrence Summers’ 1992 ‘Let them eat pollution‘ memo. It is a document most wonderful to teach basic economics, internalisation (or lack thereof) of externalities, morality in international trade, comparative advantage etc etc. As well as some history (remember Marie Antoinette, anyone?) and the myths surrounding quotes (qu’ils mangent de la brioche).

The EU have recently decided no longer to let developing countries recycle EU-registered ships through ‘beaching’: basically, one towes a discarded ship, typically with plenty of toxic substances on board or integrated in the ship’s build, unto a beach in a developing country, where subsequently the ship is dismantled without much regard to environmental control of occupational health and safety issues.

The long struggle to regulate the trade is a good example of the challenges of positive harmonisation in international environmental law. For instance, the definition of ‘waste’ as applied to a disused ship long differed between the EU (waste as soon as it is no longer used for its original purpose), the International maritime organisation (no waste as long as it can float) and the Basel Convention (reference to ‘discard’ and to national law). The 2009 Hong Kong Convention aims to address the challenges. This Convention has now been implemented by the EU, who have reportedly ‘gold plated’ it: i.e. the EU have gone beyond what is required under the Convention.

Some details of the scheme may be found here (Irish Presidency of the EU) – the text itself is not yet available. The regime uses a core element of the regime of the Basel Convention on the transboundary shipments of hazardous wastes and their disposal: i.e. employ export authorities in the ‘developed’ world, to only allow exports to ‘developing’ countries when conditions in the latter are deemed sufficiently safe from the workers’ and the environment’s point of view. In the case of the ship recycling regime, this is done by only allowing export of EU-flagged waste ships if they are to be dismantled in facilities that have been approved by the EU.

Plenty of complications remain: this includes the compatibility of the regime with the Basel Convention, and with international trade law; the problem of enforcement and inspection; and the possibility of circumvention by switching flag state.

Geert. Postscript July 2014: the Regulation was eventually adopted as Regulation 1257/2013.

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