EU Energy Law
Legal Basis: Article 194 TFEU
EU energy law derives its primary legal basis from Article 194 TFEU, introduced by the Lisbon Treaty (2009). Article 194(1) establishes four policy objectives: ensuring the functioning of the energy market; ensuring security of supply; promoting energy efficiency and renewable energy; and promoting network interconnection. Article 194(3) preserves Member States’ right to determine the conditions for exploiting their own energy resources and the choice between energy sources — affirmed in Czech Republic v. European Parliament and Council (C-5/16) concerning nuclear sovereignty. The internal energy market is founded on Articles 26, 114, and 194 TFEU, with cross-border infrastructure under Articles 170–172 TFEU (TEN-E).
Clean Energy for All Europeans Package
The Clean Energy for All Europeans (CEP) package, adopted in 2018–2019, comprises eight legislative acts: the recast Electricity Directive (EU 2019/944) ; the recast Electricity Regulation (EU 2019/943) ; the Renewable Energy Directive (RED II, EU 2018/2001) ; the Energy Efficiency Directive (EED 2018/2002) ; the Governance Regulation (EU 2018/1999) ; the ACER Regulation (EU 2019/942) ; and the recast Risk Preparedness Regulation (EU 2019/941) . The CEP introduced the energy efficiency first principle, established citizen energy communities as legal entities, required smart metering deployment, and mandated dynamic electricity price contracts. The Electricity Regulation (2019/943) established the bidding zone review process, capped cross-zonal capacity use, and introduced the day-ahead and intraday coupling framework (SDAC/SIDC).
Renewable Energy Directive (RED III 2023/2413)
The Renewable Energy Directive 2023/2413 (RED III) , adopted as part of the Fit for 55 package, raised the binding target to 42.5% of gross final energy consumption by 2030 (aspirational 45%). RED III introduced: acceleration zones for deployment (Art. 15c — “go-to areas”) with simplified permitting and positive silence (deemed consent if the authority fails to respond); the overriding public interest presumption for renewables in environmental assessment; competitive auctions as the default support mechanism; strengthened guarantees of origin; and enhanced cross-border cooperation mechanisms. The directive also addresses renewable fuels of non-biological origin (RFNBOs) , including green hydrogen. The European Commission v. Poland (C-648/18) case addressed the compatibility of national support schemes with the prohibition of retroactive changes under the RED.
Energy Efficiency Directive (2023/1791)
The recast Energy Efficiency Directive (EU 2023/1791) raised the binding target to an 11.7% reduction in final energy consumption by 2030 (relative to the 2020 reference scenario). The directive introduced: the energy efficiency first principle as a legally binding requirement; annual energy savings obligations of 1.5% of final energy consumption (up from 0.8%); a public sector obligation for 1.9% annual renovation of public buildings; mandatory energy management systems for large consumers (> 10 TJ); and provisions on energy poverty. Member States must incorporate efficiency targets into their National Energy and Climate Plans (NECPs) .
Electricity Market Design Reform 2024
The Electricity Market Design (EMD) Reform , adopted in early 2024 as Regulation (EU 2024/1747) and Directive (EU 2024/1748), was prompted by the 2021–2023 energy price crisis. Key reforms include: two-way Contracts for Difference (CfDs) for new renewable and low-carbon generation capacity; mandatory PPA market facilitation; enhanced retail consumer protection (fixed-price contracts, prohibition on unilateral changes); the virtual trading point (VTP) for flexibility; and the capacity mechanism framework with carbon intensity limits (> 550 gCO2/kWh) for new capacity. The reform also introduced provisions for demand response aggregation and energy sharing.
ACER Role
The European Union Agency for the Cooperation of Energy Regulators (ACER) , established in 2011 by Regulation (EU) 2019/942 (recast ACER Regulation), is the independent agency responsible for coordinating national regulatory authorities (NRAs) across Member States. ACER’s competences include: developing and amending network codes and guidelines for the internal energy market (electricity and gas balancing, capacity allocation and congestion management, interoperability); taking binding decisions on cross-border infrastructure issues (including regional dispute resolution between NRAs); issuing recommendations on electricity and gas wholesale market integrity and transparency (REMIT enforcement — ACER may initiate investigations and refer breaches to NRAs); conducting electricity wholesale market monitoring (the annual Market Monitoring Report); and advising EU institutions on energy regulatory matters. ACER’s decision-making body, the Board of Regulators, is composed of representatives of the 27 NRAs. The ACER Regulation was amended in 2024 to expand the agency’s powers regarding the Clean Energy Package implementation and the Hydrogen and Decarbonised Gas Market Package.
EU Emissions Trading System (EU ETS)
The EU Emissions Trading System (EU ETS) , established by Directive 2003/87/EC and now in Phase IV (2021–2030), is the world’s first and largest carbon market. The Fit for 55 revision (Directive 2023/959) introduced a steeper annual cap reduction (4.3% from 2024, 4.4% from 2028), the full phase-out of free allowances for CBAM sectors by 2034, and extension of the ETS to maritime transport (2024) and buildings and road transport (ETS II, operational from 2027). The Market Stability Reserve (MSR) automatically adjusts auction volumes when allowances in circulation exceed a threshold. The BorsodChem (C-445/14) and ArcelorMittal (C-148/14) cases examined free allowance allocation and carbon leakage exposure.
CBAM
The Carbon Border Adjustment Mechanism (CBAM) , established by Regulation (EU) 2023/956, imposes a carbon price on imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. CBAM operates through a certificate-based system: importers purchase certificates at a price linked to the EU ETS weekly auction price, corresponding to embedded emissions of imported goods. The transitional phase (October 2023 – December 2025) requires only reporting, with full operation from 2026 alongside the phase-out of free ETS allowances for CBAM sectors. CBAM’s compatibility with WTO rules (GATT Art. I, III, XX) has been extensively analysed, with arguments that it is justified under the environmental exception provided it is applied non-discriminatorily.
REPowerEU Legal Framework
The REPowerEU plan, presented in May 2022 in response to the Russian invasion of Ukraine, provides the framework for eliminating EU dependence on Russian fossil fuels before 2030. Legislative components include: the REPowerEU Regulation (EU) 2023/435 ; the EU Gas Storage Regulation (EU) 2022/1369 (mandatory 90% storage filling); the Coordinated Demand Reduction Measures Regulation (EU) 2022/1854 ; the Emergency Intervention Regulation (EU) 2022/2577 (accelerating permitting); and the Electricity Emergency Tool Regulation (EU) 2022/2578 (inframarginal revenue cap). The legal basis — Article 122 TFEU (energy supply emergencies) — was contested by Member States but upheld in the 2022 crisis context.
Gas Regulation and the Hydrogen and Decarbonised Gas Market Package
The Hydrogen and Decarbonised Gas Market Package (H&D Gas Package), adopted in 2024 as Directive (EU) 2024/1788 and Regulation (EU) 2024/1789, is the most comprehensive revision of the EU gas regulatory framework since the Third Energy Package (2009). The package extends the regulatory framework to hydrogen networks, establishes the European Network of Network Operators for Hydrogen (ENNOH) , introduces certification of hydrogen network operators, and provides for dedicated hydrogen infrastructure planning under the TYNDP process. The package also reinforces third-party access rules for natural gas transmission, with amendments for unbundling exemptions, reverse flow capacities, and LNG terminal access rules.