This has significant implications for Danish biomethane, which is unlikely to continue enjoying its competitive advantage in the Swedish market over biomethane from non-subsidised jurisdictions. While the actual impacts will depend upon if or how the scheme is amended, likely some Danish biomethane volumes currently slated for Sweden will instead be diverted to mainland Europe, which should ease upward pressure on European biomethane certificate prices.

The case in question is titled - T-626/20 - Landwärme v. Commission, where the applicant Landwärme was represented by German law firm 

, with the Swedish government supporting the Commission as the respondent. The application was documented in the Official Journal of the EU on 13 November 2020.

Swedish aid schemes and interaction with production subsidies

 approved Swedish schemes which granted exemptions for biogas for heating and transport fuel purposes respectively (note: SA.49893 was extended by 

). Essentially, biomethane used in these sectors is eligible for exemptions from both energy taxes and emissions taxes, encouraging usage relative to fossil gas which is subject to the excise as detailed in the Swedish Energy Taxation Act 1994:1776.

In the SA decision texts, estimations of biomethane (green gas) production costs are given showing that discounts associated with excise exemptions do not exceed the marginal costs of biomethane production (versus fossil natural gas), which should not result in overcompensation to green gas consumers.

The schemes also allowed for imported biomethane to be used, with suitable sustainability checks in place. However, other member states (most significantly, Denmark) offer production support for biomethane. This allowed producers to be doubly compensated - directly via subsidies and indirectly via Swedish consumers willing to pay extra to avoid energy/emissions taxes. Consumers also benefit, as biomethane producers can offer a reduced price having already covered some of their costs via subsidies.

The following slides demonstrate the situation - note that the values given are for illustrative purposes only and are not actual.

Landwarme v. Commission

 for non-EU ETS industries in 2022 was 118 EUR/tonne, or approximately 24 EUR/MWh of gas.

Given the ruling was made in the EU General Court (Seventh Chamber, Extended Composition), the commission has 

 the decision to the Court of Justice - the window for doing so is within two months of the decision.

The judgement to annul the EC decision itself does not necessarily make unsubsidised biomethane a more attractive proposition in the covered sectors. However, it opens the way for new Swedish legislation such as a fuel obligation scheme that allows greater compensation for unsubsidised biomethane versus subsidised biomethane.

This potentially makes gas from Germany (where Landwärme operates, and whose government does not offer biomethane production support) a competitive alternative. The text of the judgement suggests this would agree with equal treatment principles of the internal market (Recital 101 of the judgement).

Assuming the ruling is not appealed, this will reduce the demand for Danish biomethane in Sweden for the transport and heating sectors.

If the scheme is simply retracted and not amended, this will reduce demand for all biomethane and downward pressure on prices; without a tax exemption, imported biomethane is essentially competing against natural gas. Furthermore, Sweden does not currently have an operating gas GO registry, and there is no alternate voluntary market for certificates to support higher biomethane value.

Denmark/Sweden trade represents the highest volume of international biomethane transfers - with more than 2.5 TWh transferred in 2022, an amount which had been steadily on the rise. If the Swedish market becomes less attractive for Danish biomethane, volumes are expected to be diverted to the rest of Europe, via German registry dena in particular.

Energinet - BM GO cancellation stats

An increase in supply also has knock-on consequences for the UK RGGOs. In 2022, the fortunes of the premium UK waste GO product were closely tied to European Waste biomethane certificates, given the large volumes transferred from the GGCS to dena. If these UK Waste volumes are instead replaced by Danish biomethane (which would be less attractive for the Swedish market), this also places downward pressure on UK Waste RGGO prices.

2022 Waste BM certificate price development

Should the rules be amended to account for production support, biomethane from unsubsidised operations (including facilities in Germany, as previously mentioned) would be expected to compete in the Swedish heating and transport markets.

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On 21 December 2022, the European Court annulled the EC's approval of the Swedish state aid scheme for biomethane, which is eligible for an excise exemption, following action brought about by Landwärme GmbH. The court determined that beneficiaries of biomethane are overcompensated by the scheme due to cumulation with other support schemes, namely production subsidies, in other member states.

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