Feed-in Tariff and Minimum Wage: Both are NOT State Aid

This excellent article at Zeit Online (in German) by Armin Steinbach gives another strong reason why 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.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

2 thoughts on “Feed-in Tariff and Minimum Wage: Both are NOT State Aid

  1. In the following paper on feed-in tariffs from the year 2007:

    Click to access Michel_Feed-InTariffs2007.pdf

    I have noted on page 5 that it is more appropriate to speak of “price supports”. Fixed prices have always been set in Germany for books, newspapers, taxi fares, and many other products and services. The retailer is not allowed to sell these items at reduced prices, thus enabling small producers such as book publishers to stay in business. Without this policy, many of them would have already closed their doors, incurring an irretrievable loss to European culture.

    Fair Traded chocolate and coffee are likewise sold at consumer-supported prices that keep producers viable. In return, the customer is assured of getting products as advertised, rather than possibly being deceived of their origin. Renewable energies satisfy the same expectation of WYSIWYG: What you see is what you get.

    It could nevertheless be maintained that a customer has no control over the amount of price supports he is compelled to provide for being supplied with a certain percentage of renewable electricity. The government forces him to accept what is on the grid and to pay for it. That is still not a subsidy, however, but rather a compulsory solidarity payment for what is considered to be in the common good. A similar case applies to the storage of spent nuclear fuel, the costs of which often exceed the corporate obligations imposed by law for disposal. If nuclear plant operators go bankrupt, furthermore, the public becomes liable for all the radioactive waste they have left behind.


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