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Germany’s FIT & Minimum Wage Are Not “State Aid”

Originally published on the Lenz Blog.

This excellent article at Zeit Online (in German) by Armin Steinbach gives another strong reason the present German feed-in tariff system for renewable energy is not “state aid” under European Union competition law.

The author notes that states can set minimum wages by law. If a state does that, employers need to pay their employees more than under simple market mechanisms. As an alternative, a state could choose to pay workers on low wages some kind of aid from taxpayer funds.

The first case is not state aid, since there are no taxpayer funds involved. The second one is.

In the same way, the feed-in tariff sets a “minimum wage” for solar, wind, and other renewable energy. That means that buyers of that electricity need to pay more than under a model that would leave all prices purely to market forces.

But just like with a minimum wage, there are no taxpayer funds involved. Which means that there is no state aid, and Commissioner Almunia should lose the case the German government just started against him at the European General Court.

That in turn is good news for renewable energy in Germany, which can get rid of the useless and harmful ideas the EU Commission has about how a feed-in tariff should be built. And it would be good news for the principle of democracy, which frowns on attempted power grabs by EU institutions. The Commission gets exactly as much powers as the Member States have transferred to this institution. If they could just start deciding about every policy question around with the excuse that there may be some kind of state aid angle, that would be the end of democracy, and the end of German participation in the European Union.

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is a professor of German and European Law at Aoyama Gakuin University in Tokyo, blogging since 2003 at Lenz Blog. A free PDF file of his global warming science fiction novel "Great News" is available here.


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