The European Court of Justice ruled Thursday that Germany did not violate EU law when the member state implemented a renewable energy surcharge to help level the energy market for its domestic renewable energy providers.

In 2011 the German Legislature implemented an energy measure aimed at leveling out the competitive play field between convention and renewable energy producers. This piece of legislation was dubbed the “EEG 2012” and required energy grids to supply power generated by the same renewable producers. It also imposed a surcharge on energy generated from renewable producers, that is ultimately passed onto the consumer.

In response, the European Commission mounted an investigation. The investigation culminated with a ruling in which the Commission determined that Germany was engaging in a form “State-aid” in violation of Article 107(1) of the Treaty on the Functioning of the EU. Article 107 (1) makes it unlawful for EU member states to engage in activities based on domestic favoritism that might threaten interstate commerce and market competitiveness between its members states.

Germany attempted to appeal the Commission’s ruling before the EU General Court. The General Court dismissed Germany’s appeal. As a final resort, Germany brought this matter before the Court of Justice, the EU’s highest court, resulting with this ruling.

The Court of Justice found that the German state, under EEG 2012, did not actually qualify as state-aid because EEG 2012 did not actually mandate the energy charges to be directly rerouted to the consumers. The fact the surcharges were passed to the consumers, in practice, does not reflect on the legislation itself. The court found that any funds received from the energy surcharges, instead of being redirected as the state deems fit, were actually diverted to compensation mechanism for the energy providers. Most importantly, the state had no direct control over those funds. Ultimately, there was not sufficient evidence for the Court to deem the EEG 2012 surcharge as a form of state aid in violation of Article 107(1).