Example 2. State support of renewable energy in Germany, as balanced against EU internal market protections.

In the Preussen Elektra case, the European Court of Justice (CJEU) upheld a German law requiring power suppliers to purchase electricity from in-state producers of renewable energy at above-market prices, the extra costs of which were to be shared among upstream and downstream energy market participants. The CJEU argued that EU environmental objectives were now sufficient to support (and balance) this kind of state environmental program against internal market protections, including free economic movement interests, even considering the fact that the law was clearly economically discriminatory in mandating purchases from in-state suppliers [4] .

In addition, the Preussen Elektra Court argued the German law did not create an illegal state aid situation because there were a number of private undertakings involved in sharing the costs of these in-state energy purchases. This part of the ruling is not entirely persuasive with respect to avoiding EU state aid prohibitions, because, for starters, it ignores an independent form of economic discrimination that has been created: specifically, using state resources to favor in-state undertakings does burden out-of-state businesses trying to compete in the same market on equal terms. The power suppliers in this case included some private undertakings, but also included suppliers owned partially or wholly by the state. As such, Germany was subsidizing a substantial part of its own renewable energy mandates to buy locally.

In this example, the CJEU developed supporting language, if not exactly lasting legal precepts or deeper precedents, deciding in favor of Germany’s support of its developing, domestic renewable energy markets (including energy producers). The three pillars framework could provide in similar cases a principled decision guide or more structured justification based on the components key for successful sustainability implementations, and in light of the increasing importance of sustainability objectives in the EU.

For example, a missing pillar (here, sufficiently developed economic markets in renewables, in combination with explicit, implicit, or status quo subsidies of fossil fuel energy production) justifies stronger consideration of local or member state actions supporting environmental and sustainability objectives. In this case, with both the technological and legal supports in place, it can be persuasively argued that the scaling-up and proliferation of renewable energy production was limited only by immature economic markets. Put a different way, national environmental programs aimed at strengthening the missing economic pillar could be given consideration based on probable increases in implementation success resulting from putting all three pillars in place.

In the Preussen Elektra case, the underlying justifications for Germany’s renewable energy purchase mandates, and its de facto subsidy program, were not discussed at length. But the rationale is clearly related to strengthening or compensating for missing economic depth and market maturity necessary for the long-term success of sustainable energy supply. Without state measures and support, in-state energy providers would not support relatively expensive in-state renewable energy producers (which, for many environmental policy reasons, Germany wanted to support). Also, without the shared compensation scheme, too much of the increased cost burden would fall on one level of the energy supply and distribution market (which Germany believed might be disadvantageous or even disruptive to the continued development of this crucial sector). Even the likely other economic and longer-term objective of German law, to use state subsidies to build a strong and profitable domestic renewable energy industry, is not inconsistent with the evidence-based requirements of a three pillars strategy. Strengthening the economic pillar puts renewable energy on an equal footing as existing and subsidized fossil fuel energy suppliers and infrastructure.