The relationship between ‘financial support’ and ‘support scheme’

The relationship between the scopes of the terms ‘financial support’ and ‘support scheme’

has bearing on the matter. Recital 2 of the MRR implies that ‘support scheme’ under Article 2(k) of the RED can be a subset of ‘financial support’ under Article 17(1)(c) of the RED. Alternatively, the two sets may only intersect, or ‘financial support’ is a subset of

‘support scheme’. These options are illustrated in Figure 1 below.

125 See for example Directive 2010/31/EU, Article 10(4); Directive 2009/29/EC, Article 10(3)(h); Regulation 99/2013/EU, Article 7(3); Regulation 861/2006/EC, Articles 5 and 10; Regulation 966/20127EU Article 137.

126 See supra Section 4.3.1.2.

Figure 1: Relationship between ‘financial support’ and ‘support scheme’

Option 1 (B ⊆ A) Option 2 Option 3 (A ⊆ B)

A = ‘financial support’, Article 17(1)(c) of the RED

B = ‘support scheme’, Article 2(k) of the RED, including measures of national origin only Shaded areas indicate an intersection of A and B ( A ∩ B )

Options 1 and 2 enable considering biomass zero-treatment as ‘financial support’ despite restricting the term ‘support scheme’ to measures of national origin only. With a narrow scope for ‘support scheme’, Option 3 excludes Union-level measures (including the EU ETS and biomass zero-treatment) from the scope of ‘financial support’.

The RED does not define ‘financial support’ in any manner nor is the term used anywhere else in its text. The original Commission proposal used the term in a provision related to energy plants with long lead times, but the provision was deleted.¹²⁷

Recital 2 of the MRR implies that the scope of the term ‘financial support’ under Article 17(1)(c) of the RED includes ‘support scheme’ under Article 2(k) of the RED (Option 1 above).¹²⁸ An earlier communication from the Commission relating to the implementation

127 Commission, Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources, 23.1.2008, COM(2008) 19 final, Article 5(2).

128 According to recital 2 of the MRR, biomass zero-treatment “constitutes a "support scheme" within the meaning of Article 2(k) and consequently financial support within the meaning of Article 17(1)(c) of Directive 2009/28/EC” (emphasis added). If Z = zero-treatment, A = ‘financial support’, and B = ‘support scheme’, recital 2 of the MRR states that Z ⊆ B ⟹ Z ⊆ A. The statement necessarily implies that B ⊆ A.

This is a direct consequence of the rule of transitivity, according to which if Z ⊆ B and B ⊆ A then Z ⊆ A.

of biofuels sustainability scheme can be interpreted slightly differently.¹²⁹ According to footnote 5 of the communication, financial support is received “typically as part of a national support scheme”, implying there are forms of ‘financial support’ within the meaning of Article 17(1)(c) that are not included in the definition of ‘support scheme’.

This can hold true in both Options 1 and 2 above. Note that Option 2 is incompatible with the implication in recital 2 of the MRR.

The term ‘financial support’ is defined in more detail in the Commission Decision 2009/548/EC establishing a template for National Renewable Action Plans¹³⁰ (NREAP template) which Member States are required to submit under Article 4 of the RED.Section 4.3 of the template addresses “support schemes to promote the use of energy from renewable resources in electricity applied by a Member State or a group of Member States”. More specifically, section 4.3 addresses two types of support schemes: regulations and financial support. Most notably, examples of financial support include tax exemptions and reductions. Recalling the discussion in Section 4.3.1.1 above, the zero-treatment of biomass is similar in its effects to a carbon tax exemption. As such, biomass zero-treatment could fall within the category of ‘financial support’ as outlined in the NREAP template.

However, the same problem as with the term ‘support scheme’ arises. Again, a contextual analysis suggests that the term contains only national support measures. Section 4.3 of the template addresses support schemes “applied by a Member State or a group of Member States” which is exactly the same wording as in Article 2(k) of the RED. Accordingly, the described financial support measures fall within the scope of Article 2(k). The scope of the measures defined in section 4.3 of the National Renewable Energy Action Plan template is subject to the same contextual restriction as Article 2(k) of the RED. Accordingly, not a single Member State has identified biomass zero-treatment or any other Union-level measure in section 4.3 (or sections 4.4 and 4.5 which follow the same template) of its National Renewable Energy Action Plan.¹³¹

129 Commission, Communication from the Commission on the practical implementation of the EU biofuels and bioliquids sustainability scheme and on counting rules for biofuels, 19.6.2010 OJ C 160/8.

130 Commission Decision (2009/548/EC) of 30 June 2009 establishing a template for National Renewable Action Plans under Directive 2009/28/EC of the European Parliament and of the Council [2009] OJ L 182/33.

131 National Renewable Energy Action Plans as submitted to the Commission are available at http://ec.europa.eu/energy/renewables/action_plan_en.htm, visited 31.8.2013.

If one were to draw a strict analogy between the term ‘financial support’ in section 4.3 of the National Action Plan template and the same term in Article 17(1)(c) of the RED, the scope of ‘support scheme’ would include ‘financial support’ (resulting in Option 3 above).

Referring to our analysis on the scope of Article 2(k) of the RED, this option would exclude biomass zero-treatment from the scope of Article 17(1)(c) of the RED altogether:

If ‘support scheme’ includes measures of national origin only and ‘financial support’ is a subset of ‘support scheme’, ‘financial support’ can include measures of national origin only.

As an alternative to a strict analogy, one could argue that section 4.3 of the template only concerns measures falling under Article 2(k) of the RED but the scope of ‘financial support’ within the meaning of Article 17(1)(c) of the RED is broader. Since in section 4.3 the term ‘support scheme’ includes items not considered as ‘financial support’, these arguments would point towards Option 2 or Option 3.

In any case, in the reading of section 4.3 of the NREAP template, Option 1 above implied in recital 2 of the MRR becomes untenable. In choosing between Options 2 and 3 the key question remains the same: Should the scope of the term ‘financial support’ within the meaning of Article 17(1)(c) of the RED include measures originating from the legislative powers of the Union in addition to measures originating from the Member States (Option 2) or not (Option 3)?

A textual interpretation supports an affirmative. The term ‘financial support’ has a broad generic meaning and Article 17(1)(c) makes no connotation on the origin of the measure.

An obvious fallacy of such an interpretation is that ‘financial support’ should be read in the context of the RED. As indicated above, the context of the RED is restricted to addressing national support measures.¹³² The indications from recital 65 of the RED and section 4.3 of the NREAP template are suggestive of this conclusion. However, the contextual and purposive analysis could change when examining different provisions of the RED. The sustainability criteria are quite distinct as an instrument from the other elements of the RED. Furthermore, the object and aim of the sustainability criteria and the RED more generally can alter the interpretation. The following section analyses the object of Articles

132 See supra Section 4.3.1.2.

17 to 19 of the RED in specific and in their relation to the objects of other provisions of the Directive.