Economic instruments for biodiversity and ecosystem service conservation and the EU state aid regulation

Journal for European Environmental and Planning Law

Volumn 10, Issue 1, 2013, Pages 6-28

  Siikavirta, Kristian ^a   Primmer, Eeva ^a   Raitanen, Elina ^a   Similä, Jukka ^a  

^a NONE

Author keywords

biodiversity; economic instruments; ecosystem services; EU state aid regulation; nature conservation

Indexed keywords

EID: 84890849046     PISSN: 16137272     EISSN: 18760104     Source Type: Journal    
DOI: 10.1163/18760104-01001002     Document Type: Article

References (91)

1. Public goods are goods which are beneficial for society but which are not normally provided by the market given that it is difficult or impossible to exclude anyone from using the goods (and hence making them pay for the goods).
2. Arentino et al., Cost Sharing for Biodiversity Conservation: A Conceptual Framework, Productivity Commission Staff Research Paper, 2001.
3. I. Ring & C. SchröterSchlaack, Justifying and Assessing Policy Mixes for Biodiversity and Ecosystem Governance, in: I. Ring & C. Shröter-Schlaack, (Eds.), Instrument Mixes for Biodiversity Policies POLICYMIX-Assessing the Role of Economic Instruments in Policy Mixes for Biodiversity Conservation and Ecosystem Services Provision Report, 2011, pp. 14-35.
4. D.J. Pannell, Public Benefits, Private Benefits, And Policy Intervention for Land-use Change for Environmental Benefits. Land Economics 2008(2), pp. 225-240.
5. U.N. Doc. United Nations Convention on Biological Diversity, 1760 UNTS 79; 31 ILM 818 (1992), p. 1.
6. European Commission, State Aid Action Plan-Less and Better Targeted State Aid: A Roadmap for State Aid Reform 2005-2009, Consultation Document, SEC(2005) 795, para 15.
7. Regulation: Commission Regulation (EC) No 800/2008, OJ 2008 L 214/3.
8. ECJ Judgment, Case 47/69 Steinike & Weinlig [1977] ECR 595.
9. J. Jans & H. Vedder, European Environmental Law, 3th ed., 2008, pp. 288-289.
10. ECJ Judgment, Case C-280/00, Altmark Trans GmbH [2003] ECR I-07747.
11. Supra note 6 at p. 2.
12. K. Siikavirta, Valtiontuki oikeuden ja politiikan yhtymäkohdassa- Esimerkkinä ympäristönsuojelu, 2007, p. 114.
13. European Commission, XXIVth Report on Competition Policy 1994, para 354.
14. Pursuant to point 2.9.3. (Aid to make good damage caused by natural disaster or exceptional occurrences) of the guidelines for the examination of state aid to fisheries and aquaculture (OJ C N:o 19, 20.1.2001, p 7):
15. According to article [107(2)(b) of TFEU], aid to make good damage caused by natural or exceptional occurrences is deemed to be compatible with the common market". Pursuant to Council Directive 92/43/EEC ringed seal and gray seal are protected species.
16. The aid was thus justified on the exception grounds (article 16) of that directive.
17. Accordingly, "provided that there is no satisfactory alternative and the derogation is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status in their natural range
18. Member States may derogate from the provisions-to prevent serious damage, in particular to crops, livestock, forests, fisheries and water and other types of property-".
19. From that aspect, and foremost taking into account the exceptional increase of the seal population, the hunting prohibition of the seals and the size of the damage caused, there was a reason to assume that the aid was meant to compensate the damage caused by natural disaster.
20. Supra note 11 at p. 295.
21. The Court held, in the Case 62/87 Exécutif régional wallon and SA Glaverbel v Commission of the European Communities. [1988] ECR 1573, paras 20-22
22. that "a project may not be described as being of common European interest for the purpose of that Article [107(3)(b)]
23. unless it forms part of transnational European programme supported jointly by a number of governments of the Member States, or arises from concerted action by a number of Member States to combat a common threat such as environmental pollution."
24. ECJ Judgment, Case C-280/00, Altmark Trans GmbH [2003] ECR I-07747.
25. First, the recipient undertaking must actually have public service obligations to discharge, and the obligations must be clearly defined.
26. Second, the parameters on the basis of which the compensation will be calculated must be established in advance in an objective and transparent manner.
27. Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations.
28. Fourth, where the undertaking which is to discharge public service obligations is not chosen pursuant to a public procurement procedure which would allow for the selection of the tenderer capable of providing those services at the least cost to the community
29. the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well run and able to meet the necessary public service requirements, would have incurred in discharging those obligations.
30. ECJ Judgment, Case T-354/05, TF1 [2009] ECR II-00471, point 130-135.
31. K. Siikavirta, Services of General Interest from the European and Finnish Perspactives, in: T. Madell, T. Bakkedal & U. Neergaard (Eds.): Den nordiska välfärden och marknaden.
32. Nordiska erfarenheter av tjänster av allmänt intresse i en EU-rättslig kontext, 2011.
33. European Commission Decision, NN 8/2009-Germany Nature conservation areas, para 58.
34. Currently it is common to compensate the lost value of timber, but it may be necessary to compensate also other economic values.
35. ECJ Judgment, Case C-169/08, Regione Sardegna[2009] ECR I-10821.
36. I. Ring, Compensating Municipalities for Protected Areas-Fiscal Transfers for Biodiversity Conservation in Saxony, Germany. GAIA 17/51, 2008, pp. 143-151.
37. Regulation: 1704/2009 Act on government transfers towards local basic services, chapter 7.
38. In order to decide that the notified measure on green certificates constitutes state aid, the Commission has to determine whether state resources are at stake. E.g. European Commission Decision N 504/2000, p. 11.
39. European Commission Decision, N 789/2002 Sverige Elcertifikatsystemet, para. 3.1.1.
40. ECJ Judgment, Case C-379/98, PreussenElektra. [2001] ECR I-02099.
41. European Commission Decisions N 789/2002 Sverige Elcertifikatsystemet & N 504/2000 Renewables obligation and Capital Grants for Renewables Technologies.
42. Habitat banking is a market-like system where credits from actions beneficial for nature can be purchased to offset the debit from environmental damage.
43. Credits can be produced in advance of, and without ex-ante links to, the debits they compensate for, and stored over time" (Eftec, IEEP et al. 2010).
44. Like any market-system, habitat banking and offsets require a relevant involvement of the national and regional levels of governance, to support the development and monitoring of the system.
45. Typically habitat banking involves three key actors, "buyers" who seek ways to compensate the damage they cause, "sellers" who create credits with actions beneficial for biodiversity, and "regulators" who oversee the process (POLICYMIX-WP2 Review Habitat Banking and Offsets).
46. Certificates are proofs of qualification. In the biodiversity context they imply that activities are carried out in an environmentally friendly way, for instance forest certification can advance biodiversity conservation in commercial forests through setting certain standards for sustainability of forest management and use.
47. Increasing consumer demand for certification creates a powerful incentive for retailers and manufacturers to seek out suppliers that follow sustainability standards.
48. This in turn prompts forest managers to adopt certified practices aimed at maintaining natural forest characteristics, and to move away from destructive practices (Natural Resources Defence counsil).
49. ECJ Judgment, C-83/77 Openbaar Ministerie v Van Tiggele, [1978] ECR 25.
50. ECJ Judgment, Joined Cases C-72/91 & C-73/91 Firma Sloman Neptun Schiffahrts AG v Seebetriebsrat Bodo Ziesemer der Sloman Neptun Schiffahrts AG. [1993] ECR I-00887, para 19.
51. See European Commission Decision, N 707/2002 Nederland MEP Stimulering duurzame energie & N 708/2002 Nederland MEP Stimulering warmtekrachtkoppeling where the Commission authorised two measures called (MEP), aimed at stimulating renewable energy and combined heat and power (CHP) production European Commission, XXXIIIrd Report on Competition Policy 2003, p. 102.
52. U. Pascual, et al., Exploring the Links Between Equity and Efficiency in Payments for Environmental Services: A Conceptual Approach, Ecological Economics. Volume 69, 2010, pp. 1237-1244
53. E. Primmer et al., Institutional Evolution in Forest Biodiversity Conservation Payments. 4th ESP International Conference Ecosystem Services: Integrating Science and Practice. Wageningen 4.-7.10.2010.
54. J. Farley & S. Costanza, Payments for Ecosystem Services: From Local to Global, Ecological Economics, Volume 69, 2010, pp. 2060-2068.
55. A.Vatn, Payments for Environmental Services: Reconciling Theory and Practice, An institutional analysis of payments for environmental services, Ecological Economics, Volume 69, 2010, pp. 1245-1252.
56. S. Wunder, Payments for Environmental Services: Some Nuts and Bolts, CIFOR Occasional Paper No. 42, 2005.
57. There is an important, yet rather poorly known distinction between payments as an incentive and as compensation.
58. See more in Pascual et al., supra note 36 & A. Vatn, supra note 38.
59. European Commission Decision, NN 8/2009-Germany Nature conservation areas, paras 8-17.
60. According to settled case-law, any activity consisting in supplying goods or services on a given market is an economic activity.
61. The Commission considers that, in the case at hand, activities like sales of wood, leases of land and tourism must be classified as economic in nature.
62. The German nature conservation entities concerned by the notified measures should therefore be considered as undertakings within the meaning of Article 107(1) of the EC Treaty insofar as they exercise these activities", point 41.
63. European Commission Decision, NN 8/2009-Germany Nature conservation areas, paras 43-52.
64. Public service compensation which cannot be qualified as non-aid on the basis of the Altmark criteria may, however, be found compatible if it complies with the conditions laid down in the Community Framework for state aid in the form of public service compensation (OJ C 297 29.11.2005).
65. R. Paloniemi & V. Varho, Changing Ecological and Cultural States and Preferences of Nature Conservation Policy: The Case of Nature Values Trade in South-Western Finland, Journal of Rural Studies, Volume 25, 2009, pp. 87-97.
66. P. Horne, Forest owners' acceptance of incentive based policy instruments in forest biodiversity conservation-a choice experiment based approach, Silva Fennica, Volume 40, 2006, pp. 169-178.
67. Community Guidelines for State Aid in the Agriculture Sector (OJ C 28 2000), para 14.1. Pursuant to the new guidelines Community Guidelines for State Aid in the Agriculture and Forestry Sector 2007 to 2013 (OJ C 31 2006)
68. aid granted for private landowners for pilot and demonstration projects connected to sustainable use of forests will now be authorised if the aid fulfils the conditions set out in point 107 of the guidelines.
69. Accordingly, the Commission will examine such activities on a case by case basis and the Member State shall provide a clear description of the project including an explanation of the novel character of the project and of the public interest in granting support for it (for example because it has not been tested before)
70. demonstrate that the number of participating companies and the duration of the pilot scheme shall be limited to what is necessary for proper testing, the combined amount of aid for such projects granted to a company shall not exceed EUR 100 000 over three fiscal years
71. the results of the pilot scheme shall be made publicly available and that any other condition the Commission may deem necessary to avoid the scheme having a distorting effect on the market or amounting to operating aid." 49) A new METSO programme 2009-2016 institutionalizes voluntary site allocation and a possibility to make fixed term conservation contracts.
72. European Commission Decision, N 130a/2007-Finland Aid for forestry, paras 9-12.
73. Regulation: 1996/1094 Law on finance for sustainable forestry & 1311/1996 Decree on finance for sustainable forestry.
74. Regulation: Commission Regulation (EC) No 1698/2005, article 47 & ANNEX.
75. European Commission Decision, N 130a/2007-Finland Aid for forestry, paras 48-49.
76. Community Guidelines for State Aid in the Agriculture and Forestry Sector 2007 to 2013, (OJ C 31 2006), para 177.
77. European Commission Decision, N 130a/2007-Finland Aid for forestry, paras 50-52.
78. P. Zwaan & H. Goverde, Making Sense of EU State Aid Requirements: The Case of Green Services, Environment and Planning C: Government and Policy, Volume 28, 2010, pp. 771-772.
79. P. Zwaan & H. Goverde, supra note 58 at pp. 772-773.
80. In the absence of Community standards and market-based instruments fully reflecting the PPP level (regulatory failure) Member States may decide to pursue a higher level of environmental protection.
81. This may in turn create additional costs for the undertakings active in their territory.
82. For that reason, in addition to regulation, Member States may use State aid as a positive incentive to achieve higher levels of environmental protection.
83. P. Zwaan & H. Goverde, supra note 58 at p. 774.
84. ANNEX I List referred to in Article 38 of the Treaty on the Functioning of the European Union (OJ C 83/331).
85. European Commission, NN 8/2009-Germany Nature conservation areas, para 59.
86. See European Commission Decision, NN 8/2009-Germany Nature conservation areas.
87. In accordance with the requirements of Article 31(3) of Regulation (EC) No 1974/2006, a 'farmer' shall mean persons who devote an essential part of their working time to agricultural activities and derive from them a significant part of their income according to criteria to be determined by the Member State.
88. European Commission, State Aid Action Plan-Less and better targeted State aid: a roadmap for State aid reform 2005-2009", Consultation document, SEC(2005) 795, pp. 9-10.
89. Supra note 40.
90. In practice this would precondition that the guidelines pursuant to which state aid is allowed possessed more flexibility.
91. According to the current Agriculture and Forestry Aid Guidelines the payments to farmers could-and should-be based only on the loss of revenues (based on timber value) and additional labour costs.