Programme enabling local residents and municipalities to participate financially in wind farms permissible in principle

Press Release No. 37/2022 of 05 May 2022

Order of 23 March 2022
1 BvR 1187/17

In an order published today, the First Senate of the Federal Constitutional Court held that the Act on the Participation of Citizens and Municipalities in Wind Farms in Mecklenburg-Western Pomerania (Gesetz über die Beteiligung von Bürgerinnen und Bürgern sowie Gemeinden an Windparks in Mecklenburg-Vorpommern – Bürger- und Gemeindenbeteiligungsgesetz – BüGembeteilG – Citizen and Municipal Participation Act) is for the most part compatible with the Basic Law (Grundgesetz – GG). The law requires wind turbine operators (“project developers”) to establish a form of special purpose vehicle (“project company”) and to provide local residents and municipalities with the opportunity to participate in the earnings thereof, either by enabling them to purchase at least 20% of the project company’s shares, or by offering a savings product to local residents and paying a levy to the municipalities. The aim is to improve public acceptance of new wind turbines and thereby promote the further development of onshore wind energy. The interests of the common good that the legislation seeks to promote – protecting the climate, preventing fundamental rights from being adversely affected by climate change, and securing the electricity supply – are of sufficient weight to justify the serious interference with the project developers’ occupational freedom under Art. 12(1) GG resulting from the obligation to enable such participation.

Facts of the case:

1. Pursuant to § 3 BüGembeteilG, wind turbines in Mecklenburg-Western Pomerania may only be installed and operated via “project companies” dedicated solely to the generation of wind energy. Pursuant to § 4(1) first sentence BüGembeteilG, the project developer is obliged to offer at least 20% of the project company’s shares to certain defined eligible purchasers. Persons living within five kilometres of the wind farm are eligible, while municipalities are eligible if the wind farm is situated directly on their territory or within a five-kilometre range of the municipality. As an alternative to the share purchase option, the project developer can instead pay an annual “compensation levy” to the eligible municipalities and offer a savings product to local residents for purchase, with the amount of the levy and the interest on the savings product determined by the project company’s earnings. However, this option is only available if the municipalities waive their right to purchase shares in the project company (§ 10(7) second sentence BüGembeteilG).

Pursuant to § 4(3) BüGembeteilG, upon obtaining an immission control permit or winning a tender, the project developer must immediately provide the eligible municipalities with detailed information about the project and key economic data relevant for stock acquisition. This obligation applies even if the product developer prefers not to offer municipalities the option of purchasing shares in the project company and would rather pay the levy instead. In this case, a declaration offering to pay the levy, as well as the above-mentioned information, must be submitted immediately upon obtaining an immission control permit (§ 10(6) second sentence BüGembeteilG).

2. The complainant is a company in the wind energy industry that installs and operates wind turbines. It has a pending application for an immission control permit for a wind farm in Mecklenburg-Western Pomerania. With its constitutional complaint, the complainant directly challenges provisions of the Citizen and Municipal Participation Act and claims a violation of occupational freedom (Art. 12(1) GG), freedom of property (Art. 14(1) GG) and the principle of the equal imposition of burdens under fiscal law (Art. 3(1) GG).

Key considerations of the Senate:

The Citizen and Municipal Participation Act is constitutional in its form and, for the most part, also in its substance.

I. The Land Mecklenburg-Western Pomerania has the necessary competence to adopt such legislation. In particular, requiring project developers to establish a project company and to provide third parties with the option of purchasing shares therein does not amount to company law, which lies within the legislative competence of the Federation because it belongs to the concurrent legislative power for “law relating to economic matters” pursuant to Art. 74(1) no. 11 GG and because the Federation has already passed extensive legislation in this area. Rather, the obligations under the law must be classified under the “energy” sub-category of that legislative power. For this reason, and because the opening clause in the federal Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz) authorises the Länder to adopt further provisions regarding citizen participation and aimed at fostering public acceptance for the construction of new wind turbines, federal legislation does not exert any precluding effect under Art. 72(1) GG.

The proposed levy to be paid to local municipalities as an alternative to the share purchase option is likewise unobjectionable in terms of legislative competence. The levy does not constitute a tax within the meaning of Art. 105 GG. The legislation specifies that funds accruing from the levy must be used for the sole purpose of improving acceptance of new wind turbines among the residents of affected municipalities. By prescribing the purpose for which the funds from the levy may be used, the legislation aims to provide residents with tangible results demonstrating that wind energy can enhance the quality of life in the local area, rather than merely having a negative impact on the landscape. In terms of its statutory design, the levy does not therefore serve the general purpose of financing municipal tasks. Rather, like the share purchase option, it serves to directly promote the development of onshore wind energy in the interest of the common good. Given this objective, the levy also falls within the scope of legislative competence for “energy” under Art. 74(1) no. 11 GG.

II. The challenged obligations requiring project developers to establish project companies and to provide local residents and municipalities with options to participate therein – either by a share purchase option or, alternatively, by offering local residents a savings product for purchase and paying a levy to the municipalities – do not violate the project developers’ fundamental right to occupational freedom.

1. The immediate purpose of these obligations is to improve acceptance of new onshore wind turbines and to promote the further development of renewable wind energy. In this respect, the legislation, like all measures promoting the development of renewable energy, serves the legitimate interests of the common good of protecting the climate (Art. 20a GG), preventing fundamental rights from being adversely affected by the impact of climate change, and securing the electricity supply. The climate is protected from harmful CO₂ emissions by replacing conventional forms of electricity generation with renewable energy and by replacing fossil fuel consumption in other sectors such as transport, buildings and industry with electricity generated from renewable sources or with “green” fuels (such as hydrogen) produced using such electricity. At the same time, the reduction of CO₂ emissions also serves to fulfil the constitutional duty to protect life and health (Art.2(2) first sentence GG) and property (Art. 14(1) GG) from the risks posed by climate change. Increasing the production of renewable energy furthermore serves to secure the electricity supply. There is currently an acute need for renewables, due in part to the fact that the use of fossil fuels in electricity generation needs to be scaled down to the point of climate neutrality in accordance with the climate goal under Art. 20a GG, and in part due to the legislator’s decision to phase out nuclear power. Increasing the domestic production of renewable energy furthermore helps to reduce dependency on energy imports and to promote self-sufficiency.

2. The obligations imposed on project developers are suitable and necessary under constitutional law to achieve the aforementioned objectives of the common good. In particular, the legislator’s assumption that acceptance of onshore wind turbines can be improved by enabling the participation of local residents and municipalities in wind farms is unobjectionable under constitutional law. The legislator was able to base this assumption on reliable indications, backed up by survey results, that acceptance could be improved if the considerable negative impact of having wind turbines prominently visible in the landscape were “offset” by keeping a significant portion of the generated profits within the affected region.

3. The interference with the project developers’ occupational freedom is not disproportionate to the weight and urgency of the objectives pursued in the interest of the common good.

a) The interference with the project developers’ occupational freedom is nonetheless considerable. The obligation to establish a project company deprives project developers of the opportunity to operate wind farms through a company of their own or in some other viable manner. Entrepreneurial freedom is further restricted by the legal requirements governing the design of the project company: requirements aimed at improving acceptance and ensuring that the provisions of municipal law are observed if municipalities become shareholders. In addition, if municipalities reject the levy option, project developers are forced against their will to allow the municipalities to become shareholders in their company. The obligation to make at least 20% of the company’s shares available for purchase or, alternatively, to offer a savings product to local residents and pay a levy to the municipalities, also has the effect of lessening the income that project developers can generate from their professional activities. Moreover, project developers face significant costs in having to establish a project company, identify those eligible for the purchase option, calculate the purchase price for the offered shares and determine the company’s capitalised earnings value. Additional costs are also associated with having to fulfil the various information obligations.

b) This interference must be balanced against interests of the common good that likewise carry significant weight.

aa) These interests include the need to protect both the climate and fundamental rights from the effects of climate change. The weight attached to this interest is not diminished by the fact that the amount of CO₂-free electricity that can be generated by increasing wind energy production in Mecklenburg-Western Pomerania, the area in which the Citizen and Municipal Participation Act is applicable, is exceptionally low in view of the total amount of CO₂ currently emitted worldwide. Given that climate change is caused by countless emissions of greenhouse gas often involving relatively small amounts when viewed in isolation, the only way to prevent climate change is to adopt measures aimed at reducing all possible emissions. It is in the nature of things that individual measures are not capable by themselves of having a decisive impact. However, precisely because climate change can only be halted if these innumerable and often small amounts of CO₂ emissions are prevented at the local level, individual measures cannot be criticised as only having a minimal effect.

In any case, when measures aimed at promoting renewable energy development are adopted at the Land or municipal level, their significance for the common good cannot be evaluated solely in terms of the amount of electricity generated within the territory where the measures apply. Instead, the evaluation must be based on an overall assessment of the amount of electricity that similar measures have generated or could potentially generate. In addition, when a measure assumes nationwide importance as a pilot project, its significance for the common good may be amplified. This is the case here. Efforts to expand onshore wind energy are clearly beset with acceptance problems. According to the legislator’s constitutionally unobjectionable assessment, these problems are less acute where wind energy is produced by companies with strong local connections, and which are dedicated to single projects and involve citizen and municipal participation. By setting out specific obligations for project developers, the Citizen and Municipal Participation Act ensures that citizens and municipalities are, for the first time, statutorily guaranteed the right to participate in local wind energy projects, even where the community itself has not initiated any such projects on its own. The law can thus serve as a template for similar regulations that guarantee citizens and municipalities the right to participate in the development of wind energy, thereby improving levels of acceptance.

Beyond that, individual measures for the expansion of renewable energy can take on additional significance for the common good if they contribute towards achieving national climate targets within the international framework. If states are able to have mutual trust that other states will take action to reach the agreed climate targets, this can have a conducive effect on efforts to prevent climate change. Against this backdrop, improvements in the national emission figures, including those brought about by individual measures, can contribute towards successful climate action on a global scale.

bb) Within the context of securing the electricity supply, which is likewise an interest of the common good, the significance of an individual measure aimed at renewable energy development is directly related to the amount of electricity that can thereby be generated. The more electricity that is domestically generated from renewable sources, replacing electricity generated using fossil fuels and increasing energy self-sufficiency, the more secure the electricity supply becomes. In this respect, the Citizen and Municipal Participation Act’s promotion of onshore wind energy development plays a not insignificant role in terms of securing the electricity supply, not least due to its pioneering role in the field.

c) In light of the above, the obligations imposed on the project developers have considerable overall significance for the interests of the common good. The associated restriction of the project developers’ occupational freedom is therefore justified, despite its severity. The legislator cannot be said to have given one-sided precedence to the interest of promoting acceptance of wind energy development while disregarding the conflicting interests of project developers – not even in view of the especially intrusive obligation requiring project developers to establish and sell shares in a project company that has the sole purpose of generating wind energy. This measure is based on the legislator’s tenable assumption that wind farms enjoy particularly high levels of acceptance when operated by project companies which have strong local connections, with shared responsibility extended to citizens and municipalities. The weight of interference resulting from this obligation is considerably mitigated by the fact that project developers have the alternative of offering a savings product to eligible local residents, thereby avoiding the burdens associated with having large numbers of local residents as shareholders. Further, should a municipality reject the option of being paid a levy, thereby requiring the project developers to sell it shares in the project company, the number of shares the municipality is entitled to buy is restricted to below the minimum amount required to establish a blocking minority. This means that the municipalities have no power to direct the project company’s operations or veto shareholder decisions. In addition, the public participation obligations can also have a private benefit, because the legislative objective of improving public acceptance in order to promote the increased production of onshore wind energy coincides with the collective interest of wind farm operators in expanding the area of land available for wind energy production. This to some extent offsets the reduction in returns that results from enabling local residents and municipalities to participate in the project company’s dividends and predicted earnings.

4. By contrast, requiring that project developers provide local municipalities with comprehensive project information and economic data relevant for acquiring shares in the project company – an obligation which must be carried out immediately upon obtaining an immission control permit and which entails considerable expense – is disproportionate insofar as it also applies to project developers who wish to pay municipalities a levy rather than offering them the option of purchasing shares. Based on the evidence at hand, municipalities do not rely primarily on the detailed economic data in determining whether to purchase shares. After all, given that project companies are required to have a strict and exclusive focus on wind energy generation, no serious risk of financial loss is to be expected. Rather, there were already indications during the legislative process that municipalities would generally seek to avoid the option of purchasing shares in the project company due to the administrative costs associated with shareholding, and would opt for the levy payment instead.

III. 1. The challenged provisions do not interfere with freedom of property under Art. 14(1) GG, as this fundamental right is superseded in the present case by the substantively more relevant fundamental right of occupational freedom under Art. 12(1) GG. Nor has there been an expropriation within the meaning of Art. 14(3) GG, because the shares of individual project developers in project companies have not been deliberately seized by the state for the purposes of fulfilling specific public tasks.

2. The unequal treatment of project developers who are obliged to pay a levy compared to taxpayers who have no such obligation is justified under constitutional law. As set out above, the levy does not serve the purpose of financing municipal tasks; instead, it serves to directly promote the development of onshore wind energy in the interest of the common good by improving public acceptance. As such, the levy is suitable, necessary and appropriate for achieving the pursued objectives of the common good: protecting the climate, preventing fundamental rights from being adversely affected by climate change, and securing the electricity supply. Furthermore, the burden associated with paying the levy is not disproportionate to the significance of those objectives, especially given that project developers have the discretion to choose whether to offer local municipalities the payment of a levy instead of the option of purchasing shares in the project company.