Key Contacts: Niall Donnelly – Partner |
Overview
On 29 March 2026, the European Commission issued a formal Detailed Opinion to the Irish authorities in response to Ireland’s notification of its proposed Renewable Heat Obligation (“RHO”) scheme, which was notified to the Commission on 23 December 2025 under the technical regulations notification procedure provided for in Directive (EU) 2015/1535.
The Commission’s opinion is significant. It finds that a key feature of the proposed scheme, a domestic production “multiplier” for biomethane, is incompatible with EU internal market rules. As a consequence of the Detailed Opinion, Ireland is required to postpone adoption of the draft legislation for six months from the date of notification, meaning the standstill deadline falls on 29 June 2026. It is also required to respond to the matters raised by the European Commission in the correspondence.
Background: What Is the RHO Scheme?
The proposed RHO scheme would require Irish suppliers of fossil fuels used for heating purposes to ensure that a proportion of the energy they supply comes from a renewable source. Its primary aim is to increase the use of renewable fuels across the heating sector, thereby supporting the achievement of Ireland’s heating and cooling targets under the Renewable Energy Directive (Directive (EU) 2018/2001).
A secondary objective is to support the development of Ireland’s indigenous biomethane industry, which the Irish authorities argue will play a crucial role in decarbonising the Irish agricultural sector and enhancing energy security. This secondary objective would be achieved through a certificate “multiplier” applied to each unit of biogas/biomethane produced domestically and certified under the RHO scheme.
Under the notified measure, one unit of biomethane produced in Ireland would count as 1.5 units towards a supplier’s obligation. In practical terms, the Irish authorities confirmed that the use of this multiplier would be in place for a limited time only to support a newly developing industry, and not for the full duration of the scheme, which is established until 31 December 2045.
The Commission’s Concerns
The Multiplier Constitutes a Measure of Equivalent Effect to a Quantitative Restriction
Article 34 TFEU, as interpreted by the Court of Justice of the European Union (CJEU), prohibits any measure which is capable of hindering, directly or indirectly, actually or potentially, intra-Union trade. In particular, measures adopted by a Member State the object or effect of which is to treat products coming from other Member States less favourably are regarded as measures having an effect equivalent to quantitative restrictions.
The Commission found that by applying an additional certificate multiplier of 0.5 to every unit of domestically produced biomethane, the scheme establishes a difference in treatment between domestic trade and import trade in biogas/biomethane units. That legislation is considered a measure having equivalent effect to a quantitative restriction on imported biogas/biomethane units, contrary to Article 34 TFEU, insofar as the certificate multiplier treats biogas/biomethane from other Member States less favourably than domestic biomethane, thus dis-incentivising suppliers from importing those units since they would count 0.5 times less toward a supplier’s obligation.
The Measure Cannot Be Justified Under Article 36 TFEU
The Commission assessed Ireland’s justification against the four-limb proportionality test and concluded that the measure fails at each stage:
- No Legitimate Objective
The Commission is of the view that the notified draft does not pursue a legitimate objective of EU law as it fails (i) to take into account the EU objective of promoting EU-wide cooperation on renewable energy, and (ii) is not focusing on the actual EU objective, which is to achieve a 42.5% consumption of renewables in the Union by 2030.
By setting the additional certificate value at the level of 0.5, the Irish authorities appear to justify their objective based on purely economic reasons. However, the Commission noted that it is settled case-law that purely economic reasons do not embody legitimate public interests.
It was also noted that the Irish authorities have not proven why biogas/biomethane produced in other Member States and consumed in Ireland would not contribute to the renewable energy target. The analysis is focused solely on showing that imported biomethane would be cheaper than indigenously produced biomethane.
- Measure Not Appropriate to Achieve the Aim
The Commission also said that although the material submitted by the Irish authorities provides some evidence about the price difference between imported and domestic biogas/biomethane, the Commission could not identify a clear argument or evidence proving that applying an additional certificate value of 0.5 certificates to every unit of biogas/biomethane produced domestically is a necessary means to promote consumption of renewable fuels across the heating sector in Ireland.
The Commission also noted a significant gap in Ireland’s modelling: the modelling presented as supporting evidence refers to imported biomethane by pipeline; however, as long as UK legislation does not adhere to the conditions in the Union Database (see Article 31a of RED III) or the related sustainability requirements, no pipeline-based biomethane from the UK or continental Europe can be imported to Ireland, nor can it eligibly count towards Ireland’s contribution to the RED target.
- Measure Goes Beyond What Is Necessary
The Commission also noted that the aim of the notified draft, increasing the use of fuels of renewable origin across the heating sector, could be achieved by also allowing biogas/biomethane produced in other Member States, which would also be coherent with the legal regime established by the relevant EU directives. The Irish authorities failed to prove why the limitation of the additional certificate multiplier to domestic producers is within the limits of what is necessary.
While the Irish authorities indicated that the multiplier is intended as a temporary measure only, they did not specify when it would end, merely referring to an intention to periodically review the RHO scheme starting in year three following introduction and potentially initiating a phase-out should domestic biomethane production costs come in line with EU production costs. The Commission found this insufficient to substantiate the claim that the measure is genuinely temporary.
- Less Restrictive Alternatives Available
The Commission is of the view that the Irish authorities have not discharged the burden of proof in demonstrating the absence of less restrictive alternatives. In particular, the Irish authorities failed to explain why other incentives or support schemes targeting national biogas/biomethane producers would not be an appropriate and sufficient measure to meet their stated aim.
None of the options considered by the Irish authorities examines a less restrictive means that would require a national support measure not excluding biogas/biomethane imported from other Member States.
- Risk of Constituting a Disguised Restriction on Trade
The Commission further invited the Irish authorities to submit arguments as to why the final sentence of Article 36 TFEU, prohibiting arbitrary discrimination or disguised restrictions on trade between Member States, does not apply in respect of the notified draft, which apparently seeks to shield domestic biogas/biomethane production from imported biogas/biomethane.
Procedural Consequences
As a result of the Detailed Opinion, the Irish authorities are required to postpone adoption of the measure for six months from the date of notification (i.e., until 29 June 2026) and are required to inform the Commission of the action they intend to take on the opinion.
If the Irish authorities fail to comply with their obligations under Directive (EU) 2015/1535, or if the draft technical regulation is adopted without taking account of the objections raised, or is otherwise contrary to Union law, the Commission has stated it is ready to initiate infringement proceedings against Ireland under Article 258 TFEU.
What Happens Next?
The Commission has expressed its full availability to pursue discussions with the Irish authorities to identify less restrictive alternative measures that, while allowing the achievement of national objectives, would be compatible with free movement rules within the Internal Market.
Businesses operating in the Irish renewable heat and biomethane sectors should be aware that the current draft of the RHO scheme is likely to be revised, potentially significantly, before it can be adopted. Key issues to watch include:
- Whether Ireland redesigns the multiplier mechanism or removes it entirely;
- Whether alternative support mechanisms — such as direct production subsidies decoupled from the certificate scheme — are adopted;
- The timeline for any revised notification and the Commission’s response thereto; and
- The potential for infringement proceedings if Ireland proceeds with the scheme as currently drafted.
