Adapting Hydropower to European Union Water Law: Flexible Governance versus Legal Effectiveness in Sweden and Finland

Abstract In both Sweden and Finland, water law has traditionally provided strong protection for hydropower operations by issuing permanent environmental licences. This national protection has started to erode as a result of the requirement of the European Union (EU) Water Framework Directive (WFD) for permit reviews to improve the ecological status of rivers. In the light of this dynamic between European and national frameworks, this article compares the Swedish and Finnish implementation of the WFD regarding existing hydropower operations. Whereas Sweden has adopted comprehensive legislative and policy reforms that embrace a systemic perspective on reconciling hydropower with the current societal and ecological circumstances, Finland has relied on bottom-up collaborative processes at the grassroots level. The article shows that both approaches are problematic in so far as they push the boundaries of proper implementation of the WFD and, by extension, the achievement of the ecological objectives of the WFD in waters affected by hydropower. Our comparison highlights tensions between EU law requirements for formal legal effectiveness in national implementation, and the WFD's aspirations for adaptive river basin-based governance.


Introduction
In both Sweden and Finland, harnessing rivers for hydropower has historically constituted a major source of energy. 1 While the number of hydropower installations in the two adapt their hydropower policies to align with the present societal and ecological standards.
At the EU level, Directive 2000/60/EC establishing a Framework for Community Action in the Field of Water Policy, the Water Framework Directive (WFD) provides a legal obligation for greening the hydropower sector. 11The Directive sets substantive objectives for rivers harnessed for power production that call for measures such as reducing barriers to fish migration and restoring ecological flows. 12The WFD has relied heavily on regional and local implementation, and granted Member States discretion in designing appropriate national or local governance arrangements. 13This serves as a textbook example of the principle of subsidiarity articulated in Article 5(3) of the Treaty on European Union (TEU). 14The principle guides the use of the Union's legislative powers in areas where the EU and the Member States have shared legislative competence. 15In parallel, particularly in the field of EU environmental law, the principle has also been recognized as guiding regulatory design and allocation of societal power.It requires public power to be attributed to the level of government (local, regional, national) where it can most effectively be exercised, and that decisions are taken as closely as possible to the citizen. 16This includes a strong focus on accounting for regional and local conditions in the legal formulation of, and Member States' autonomy in national legislative, institutional, and administrative arrangements in pursuit of implementing EU law. 17Moreover, the WFD includes flexible exemption clauses to reconcile the ambitious ecological goals of the Directive with other national and local public interests related to water use. 18et, initially, the flexibility of the WFD led to significant legal uncertainty regarding the specific obligations imposed on Member States. 19Early on, legal scholarship voiced concerns that the lack of clear and enforceable rules would undermine the effectiveness of the Directive in compelling Member States to implement ambitious water management. 20The national implementation of Sweden and Finland validated this concern: their focus on setting up procedural planning frameworks failed to include substantive changes in the laws regulating different water use activities, including hydropower. 21fter prolonged ambiguity, the WFD and its implementation took a turn towards legal formalism to remedy these shortcomings.In 2015, the Court of Justice of the European Union (CJEU) confirmed that water management objectives are legally binding in permitting water use activities (Case C-461/13, the Weser judgment). 22ubsequent judgments have seen progressively stricter interpretations of the Directive. 23Prompted by the Court's case law, the European Commission has increasingly utilized the formal compliance control mechanisms of EU law for the substantive content of the WFD.Notably, this resulted in Sweden facing a formal infringement procedure on the ground of flaws in the legal implementation of its obligations to review hydropower permits. 24In the wake of this Swedish landmark case, the Commission has started inquiries into the permit review processes in a number of other Member States. 25In response, initiatives have been put in place in both Sweden and Finland to fulfil the requirements of EU law and align the hydropower sector with current socioeconomic and environmental concerns. 26espite clear legal and institutional similarities between Sweden and Finland, their governance approaches in response to the WFD differ markedly, which may be attributed to the very different number of hydropower installations in the two countries.In response to the Commission's formal infringement action, 27 Sweden has adopted major legislative changes and other initiatives led by the central government to reconcile the interests related to hydropower and gain a systemic control of the sector. 28By contrast, Finland has relied primarily on funding schemes to prompt grassroots action and collaborative processes at the river basin level. 29Accordingly, the Swedish approach can be characterized as being of a systemic nature, which relies on a legalistic, top-down framework, while the Finnish choice entails a context-specific, ad hoc approach with a bottom-up orientation. 30his article argues that these differences relate to and illustrate the evolutionary phases of the WFD, as previously described.These phases have been shaped by a dynamic tension between some of the core principles of EU law: the general formalistic requirements of EU law for legal effectiveness of national implementation on the one hand, and aspirations for adopting a more flexible governance pattern shaped by the principle of subsidiarity found in the WFD on the other.To illustrate this tension, this article compares the approaches of both countries to regulating and governing their existing hydropower operations in implementing the WFD.By comparing these approaches, the article reveals how more flexible governance-oriented EU frameworks and the formal regulatory infrastructure governing the implementation of EU law clash and compete within the Member States, and how this friction might affect the outcomes of implementation at the national level.Methodologically, the article is based on a legal doctrinal analysis, complemented by the analysis of relevant policy developments in Sweden and Finland.
The article is structured as follows.Section 2 outlines the frames of EU law on governing hydropower, including general rules on national implementation in the EU legal context and the specific requirements of the WFD.The Swedish framework is analyzed in Section 3, while Section 4 delves into the Finnish system.Section 5 discusses and 27 Infringement Case 2007/2239, n. 24 above. 28See, e.g., Regeringens proposition 2017/18:243 'Vattenmiljö och Vattenkraft' (Government Bill 2017). 29See, e.g., Maa-ja metsätalousministeriö (Ministry of Agriculture and Forestry), 'Vaelluskalakantojen elvyttämisohjelma NOUSU', 14 Oct. 2023, available at: https://mmm.fi/vaelluskalat/vaelluskalaohjelma.In this article we use the terms 'collaborative processes' or 'collaborative initiatives' to refer to collaborative governance processes in which a public sector institution engages other community stakeholders (i.e., other state and municipal agencies, interest groups, operators and resource users, stakeholders, citizens and their representative non-governmental organizations) in carrying out a strategic learning process aimed at framing public values, in formulating a shared understanding of community problems and outcomes, and in carrying out and overseeing the implementation of the agreed measures.compares the two approaches with a particular focus on how the findings might inform implementation of the WFD more generally in EU Member States.Section 6 concludes.

The WFD Requirements on Hydropower
Adopted in 2000, the WFD sets ambitious objectives for the quality and functioning of all surface waters in Europe,31 and a system of river basin management plans (RBMP) that serves as a framework for water policies. 32The Directive's substantive and procedural elements form the principal framework for water governance in EU Member States, as EU law enjoys primacy over national law. 33Directives such as the WFD need to be implemented by the Member States, a process which encompasses adopting national legislation and establishing the necessary governance arrangements to ensure that the full legal content of the Directive is realized. 34Implementation efforts are subject to the Commission's oversight and, when necessary, judicial enforcement through infringement processes. 35In such cases, the Commission can refer the matter to the CJEU to enforce compliance. 36This section describes the WFD approach to water governance with a particular focus on its requirements for controlling the environmental impacts of existing hydropower operations and the enforcement of these requirements in the EU legal context.

The Ecological Objectives in Rivers Harnessed for Hydropower
The WFD sets two main substantive norms for natural surface waters management: preventing any deterioration of water status, and achieving 'good status' in all water bodies by 2015 or, in the case of exemptions, no later than 2027. 37'Good status' of surface waters includes good chemical quality, 38 as well as 'good ecological status' (GES).In general, GES is assessed according to a five-level classification system based on the status of relevant biological quality elements and considering other environmental conditions, such as hydromorphological elements, which affect the biological quality. 39With regard to rivers, GES includes biological factors such as abundance and composition of fish fauna, with hydromorphological factors such as hydrological regime (river flows) and river continuity also figuring in the analysis. 40Ecological status is assessed based on the extent to which the state of the biological elements deviates from the highest status class: 'high ecological status'.GES marks only slight deviation from that condition. 41ydropower operations have considerable impacts on the ecological status of rivers, which may result in the biological elements falling short of the standards for GES. 42ccordingly, achieving GES in water bodies harnessed for hydropower requires extensive mitigation measures or even the removal of dams, at least in principle. 43In practice, the WFD allows Member States to designate rivers 'heavily modified water bodies' (HMWB), which are assessed in terms of a lower ecological status objective -'good ecological potential' (GEP). 44A water body may be designated an HMWB where hydropower activities have substantially changed it to the point where GES cannot be reached without a significant adverse effect on the water use in question (here, hydropower generation).An additional condition is that technical or economic reasons prevent the benefits of the activity being achieved by less environmentally intrusive methods. 45Based on these conditions, waters affected by large-scale hydropower operations, specifically those with a maximum installed capacity exceeding 10 megawatts (MW) and involving water storage, are more likely to warrant a designation of HMWB. 46However, waters affected by small-scale hydropower activities, with capacities below 10 MW and lacking storage capacity, do not. 47The WFD's objective setting thus reflects societal preferences.For larger, more societally important hydropower operations, there is the possibility to accommodate certain ecological requirements.In contrast, for smaller operations, it is presumed that ecological status interests prevail, which calls for the decommissioning of such facilities.
Clearly, efforts should also be made to improve the ecological state of HMWBs.The GEP objective describes 'only a slight deviation from the highest ecological status and the point on an ecological continuum' that would be achievable without causing 39 Arts 2(18), ( 21), ( 22) and (24), and Annex V, ss.1.1.1 and 1.2 WFD. 40Ibid.; WFD CIS 2015, n. 12 above, pp.2-3, 27-8. 41Annex V, s. 1.2.1 WFD. 42The WFD classification system particularly captures the adverse impacts on fish stocks as a result of the barriers to fish migration caused by dam structures: WFD CIS 2015, n. 12 above, p. 34. 43WFD CIS 2015, n. 12 above, p. 12; Soininen et al., n. 1 above, pp.322-3. 44Arts 4(1)(a)(iii) and 4(3) WFD. 45 significant adverse effects on the water use in question. 48Depending on how 'significant adverse effect' is defined, achieving GEP may necessitate measures such as building fish passages and bypass channels or operating the hydropower facility in a way that maintains natural flow regimes and water levels.The scope of measures required depends on whether the 'significant adverse effect' is assessed in relation to the hydropower sector's contribution to the Member State's overall energy supply or at the level of the individual facility.In concrete terms, carrying out ecological measures often decreases the production of a hydropower plant.While this may be a significant adverse effect for the operator, the loss may not have any impact on the energy system and public interests at large, in cases where hydropower is provided by a large number of facilities.While Article 4(3) WFD does not unequivocally endorse the state-or facility-level interpretation, the Commission has maintained that only adverse effects on the general societal functions served by the facility can be taken into consideration, not harm to private interests of the operators. 49In other words, a loss of production or storage capacity that causes a risk to energy security can be considered a 'significant adverse effect', but not losses for individual hydropower operators.Following this interpretation implies that Member States should systematically assess the overall societal function of the sector and the contribution of each facility to it, and steer operators to carry out the water management measures across the relevant HMWBs accordingly.
In addition to designating water bodies as HMWBs, the WFD contains an exemption regime which may be applied to further temper an operator's water protection obligations.For example, Article 4(4) allows the deadline for implementing measures and attaining the environmental objectives to be extended to 2027 (or even beyond in the case of 'natural conditions'). 50Article 4(5) provides that Member States can set less stringent environmental objectives for certain water bodies if achieving GES or GEP would be infeasible or disproportionately expensive.This does not automatically mean that no measures will be required, as Member States are required to ensure that no deterioration occurs and that the highest possible ecological status is achieved. 51Yet, adopting less stringent objectives makes it possible to take into account the costs of measures and the interests of the operator, which are considerations that are not incorporated into the GES or GEP objectives. 52The precondition for setting less stringent environmental objectives is that the societal or ecological needs served by the activity cannot be achieved by less environmentally intrusive means. 53Generally, this option does not apply to small-scale hydropower facilities. 54Moreover, the exemption cannot be made permanent but must be reviewed every six years along with the RBMPs. 552.Implementing the Water Quality Aspirations: River Basin Governance and Formal Permit Review Obligations Traditionally, EU environmental directives provide rather specific and detailed substantive rules that are to be implemented and administrated by the Member States. 56This formalistic, top-down steering has proven problematic in addressing complex socio-ecological challenges such as improving the quality of aquatic ecosystems. 57The WFD is an example of a shift towards more flexible governance patterns in EU law. 58This so-called governance approach comes to the fore in allowing much of the substantive legal content to be decided at the national level and subsequently adjusted to accommodate local circumstances in each context. 59This practice has been referred to as 'applied subsidiarity'. 60n keeping with the governance approach, the WFD sets common framework objectives, achieving GES and GEP, but gives Member States discretion in developing the substantive water policies through which this is accomplished in specific circumstances. 61The novelty of the WFD is its hydrology-based approach, in which river basin districts form the primary units of management for which customized policy is developed. 62The Directive's regulatory orientation also shows proceduralization of EU law, in which, alongside more broadly worded substantive law, procedural elements are regulated in a specific, detailed and clearly binding manner. 63In the case of the WFD, this applies to its river basin management planning process, which incorporates a cyclical decision-making mechanism that encourages the production and absorption of new knowledge in water management policy.
Its flexibility notwithstanding, the WFD prescribes in Article 11(3) that Member States are to incorporate certain measures into national law. 64One such measure is permit-based control for hydropower operations, which requires that permits be reviewed and updated when necessary. 65However, the Directive does not lay down specific rules on how its instruments should be used in each water management context. 66oreover, it explicitly demands high-level involvement and engagement of non-state actors in its implementation, favouring participatory and collaborative governance arrangements in water management. 67In the context of hydropower, water management could thus include a permitting system established in state-made 'hard law' but also involve other types of measure, such as collaborative governance processes and agreed voluntary actions by the operators that advance the WFD's aims.As further evidence of the Directive's flexibility, the provisions on achieving GES or GEP were first seen as aims for water management rather than strictly legal requirements. 68he flexible approach of the WFD to substantive regulation was not exactly welcomed with open arms in legal scholarship.This flexibility was feared to be so extensive that it could undermine the Directive's capacity to be backed up by the strong enforcement mechanisms that constitute an essential characteristic of EU law. 69These mechanisms take the form of formal compliance control by the Commission and the CJEU, which addresses the sufficiency of Member States' implementation efforts, including legal transposition and practical application. 70A general challenge for directives invoking a governance approach in EU law is that the requirements of EU primary law 71 for implementation highlight formalistic virtues such as legal effectiveness, 64 See L. Baaner, 'The Programme of Measures of the Water Framework Directive: More than Just a Formal Compliance Tool' (2011) 8(1) Journal for European Environmental and Planning Law, pp.82-100, at 84. 65 Art.11(3)(e) and (i) WFD. 661 In the EU legal system, primary law consists of the foundational treatiesthe TEU and TFEUwhich establish the EU, its institutions, competences and functioning, as well as the fundamental duties of Member States.In turn, secondary law includes EU legal actsmainly directives and regulationsadopted based on the primary law of the various policy sectors in which the EU has regulatory competence.Implementation of secondary law in Member States is governed by the general rules and principles of EU primary law, which include a duty to ensure proper fulfilment of the obligations arising from the acts of the Union: Art.4(3) TEU.
legality, and legitimacy. 72Member States are required to transpose a directive's provisions with unequivocally binding force to ensure their full application.This prioritizes explicit statutory rules, as mere interpretations of existing domestic law, administrative practices or the jurisprudence of national courts will generally be insufficient to meet the conditions of EU law. 73Moreover, particularly when natural or other persons are concerned, the legal situation resulting from national implementation must be sufficiently precise, clear, and transparent to enable the individuals affected to know the extent of their rights and obligations. 74he WFD was perceived as fitting poorly into these formal frames of EU law because the Directive lays down only vague substantive norms, such as achieving GES or GEP, without specifying how these apply in specific instances, who the principal responsible actor is, and the legal obligations that apply to different actors. 75Perhaps unsurprisingly, the transposition of the WFD in various Member States invited challenges. 76Moreover, the Commission encountered difficulties in enforcing the Directive's substantive aspects.Infringement control focused mostly on the timely fulfilment of the procedural obligations. 77Meanwhile, substantive questions, such as the need to carry out water protection measures in hydropower facilities, were addressed only in the Commission's feedback on the Member States' RBMPs and, even then, not in a very legally specific manner. 78ith the CJEU Weser judgment in 2015, the interpretations of the WFD took a sharp turn towards more traditional legal requirements, rules, and enforceable rights.The Court interpreted Article 4 as establishing binding, specific substantive rules on the permitting of new water-use activities. 79The Court has since issued a number of judgments elaborating the substantive content of the WFD.These include the geographical and temporal scope of prohibited deterioration, 80 grounds for granting exemptions to new projects, 81 and the rights of individuals to rely on Article 4 in judicial proceedings. 82As a result of this case law, the obligations under the WFD are now seen as strict substantive legal requirements imposed on the Member States, meaning that Member States are required to ensure by any means necessary that the objectives are achieved in all water bodies. 83ince the Weser judgment, water management objectives have been interpreted as creating binding requirements on permit reviews as well. 84Thus, unless an exemption applies, an updated permit should encompass all relevant mitigation measures to ensure that the activity does not cause deterioration of water status or jeopardize achievement of GES or GEP. 85In cases where this is not feasible, the permit should be revoked. 86In short, clear substantive norms have emerged in the WFD regarding the re-permitting of hydropower that can be enforced through EU law's formal compliance control mechanisms.Yet, as these mechanisms favour legalistic, top-down implementation, where the national central government bears responsibility for its effectiveness, 87 it is now harder for Member States to rely on river basin district-based and informal policies that hinge on bottom-up processes or voluntary measures. 88Indeed, after the Weser judgment, the Commission initiated an infringement action against Sweden addressing the country's failures to ensure that hydropower permits would be reviewed in the light of water management objectives. 89In the following sections, the evolution of the WFD dynamics is illustrated using the examples of Sweden and Finland.

Sweden: Legislative Reform and a Top-Down Framework
Hydropower plays a crucial role in Sweden's energy system.It is one of the main sources of electricity in the country, together with nuclear and wind power. 90In 2021, it accounted for 43% of the total electricity generated, with approximately 16,400 MW installed capacity. 91Sweden has committed to ensuring that 100% of its electricity will come from renewable sources by 2040.This goal relies heavily on hydropower for both its production and regulation capacity: that is, capacity to balance the grid by timing production based on the fluctuations of input from other sources. 92At the same time, hydropower operations entail significant adverse environmental impacts, with some 1,000 to 1,200 water bodies affected by hydropower generation. 93Given that 208 of Sweden's roughly 1,800 to 2,000 hydropower facilities account for 94% of the annual electricity generation and grid frequency balancing capacity, 94 some 90% of the country's hydropower operations play a negligible role in its energy provision. 95rom 2019 onward, Sweden has adopted extensive legislative changes and new policy frameworks to carry out a systematic revision and transformation of the hydropower sector to meet the WFD obligationsas required by the Commission in its infringement case.These developments are analyzed in the following section.

Implementation of the WFD in the Hydropower Sector
Sweden transposed the WFD into its national legislation by incorporating general provisions relating to the Directive's water management objectives into the Environmental are county administrative boards (Länsstyrelse), five of which are responsible for conducting river basin management planning with the support of other boards.The Swedish Agency for Marine and Water Management (Havs-och vattenmyndigheten, SWaM) plays a supporting and coordinating role by providing national guidance on water management.At first, river basin management was considered predominantly as a procedural frame for planning, without substantive obligations to achieve the objectives prescribed by the WFD.This can be seen in the division of competence in the Directive's implementation: water management planning is conducted by county administrative boards, whereas permitting of water activities in most cases falls within the competence of land and environmental courts (Markoch miljödomstol).On the side of substantive law, the Environmental Code employs a system of environmental quality standards (EQS)that is, general norms on environmental quality that have legal implications in accordance with the Code's other provisions. 98Initially, the ecological objectives of the WFD were not given binding legal status in the EQS system. 99nstead, they were applied in permit proceedings in accordance with the Code's 'general consideration rules', meaning that operations need to undertake measures to prevent and mitigate adverse impacts on these EQS only to the extent that a cost-benefit assessment deems them reasonable. 100cological objectives did not effect changes to existing hydropower permits, or have strong legal weight in the permit reviews that were possible in those otherwise initiated.Swedish water law contained a strong permanence doctrine for hydropower permits, which meant that they were granted for an indeterminate duration and were not automatically reviewed. 101This was a major challenge as about 90% of the hydropower operations in Sweden had been permitted prior to the adoption of the Environmental Code (1998) and the WFD (2000). 102Accordingly, the vast majority of the country's hydropower facilities operated with outdatedif anyrequirements for environmental measures. 10398 For a comprehensive exploration see L. Gipperth, Miljökvalitetsnormer: en rättsvetenskaplig studie i regelteknik för operationalisering av miljömål (Uppsala University (Sweden), 1999). 99The Code provides four categories of EQS, and only the WFD's chemical status objectives constituted 'limit values' that are binding on all permit decisions: Environmental Code, Ch. 5, s.

Transnational Environmental Law
While, in principle, the Environmental Code provided authorities with some opportunities to review and update existing permits,104 it contained several legal conditions that protected the interests of operators over the need to enforce the interests of environmental protection.Firstly, operators had no obligation to subject their permits to review; instead, authorities had to apply for a review from the environmental court.Secondly, a review was possible only if it did not significantly harm the particular hydropower operation: only a maximum of a 5% loss in production was accepted without the authorities having to pay compensation to the operator. 105Thirdly, new or modified conditions could be introduced only if they were deemed reasonable based on a cost-benefit analysis. 106Lastly, revoking a permit without the operator's consent was not possible in practice. 107n 2007, the EU Commission initiated an infringement procedure against Sweden, which, among other aspects, addressed the lack of legally binding water management objectives in Swedish law. 108Later, relying particularly on the Weser judgment, the Commission urged Sweden to change its legislation to ensure the binding impact of water management objectives on permit processes, specifically by amending the Environmental Code's EQS system. 109The infringement procedure also addressed the situation of existing hydropower operations. 110Faced with the risk of being brought before the CJEU, Sweden adopted new legislation with considerable changes to the Code.These amendments entered into force on 1 January 2019. 111he amended Environmental Code in force today sets a general obligation on hydropower operators to ensure that their operation is consistent with 'modern environmental conditions', meaning that a facility's permit conditions relating to the protection of human health or the environment are not older than 40 years. 112If this requirement is not met, the operator is obliged to apply for a permit review.As the requirement applies to the majority of Sweden's roughly 1,800 hydropower facilities, to prevent applications from swamping the environmental courts the new legislation provides that the time frame for submitting an application is set for each operator in a new national plan adopted by the government.The plan provides a 25-year time frame for review groups in each watershed, with the first applications to be submitted by 1 February 2022 and the last by 1 February 2037. 113This time frame clearly exceeds that of the WFD, which stipulates that measures aimed at achieving GES or GEP in the water bodies should be implemented no later than during the third RBMP, spanning the period from 2022 to 2027. 114he substantive law related to permit reviews was also amended to make the ecological requirements under the WFD binding under Swedish law.The current law provides that in permitting new activities or reviewing the permits of existing activities, the permitting authority must impose permit conditions and other requirements to ensure that the operation will not cause deterioration of water status or jeopardize the attainment of water management objectives. 115Furthermore, the limitation that a permit review may not significantly harm the operation no longer applies in situations where new conditions are necessary for complying with the water management objectives. 116What is more, it is now the permit holders who are responsible for applying for a review, whereby the burden of submitting the necessary information to the court, and the costs of the review process and meeting the new permit requirements, have been transferred to the operators. 117One accommodation for operators is that they can apply for compensation from a new Hydroelectric Environmental Fund established by the country's largest hydropower companies. 118This compensation may cover as much as 85% of the costs related to the permit review application process and implementation of the environmental measures, as well as lost revenue. 119t is now also possible to revoke a permit entirely without the operator's consent. 120owever, this amendment has limited impact: as the hydropower operator must apply for a permit review, it is the operator which determines whether it opts to pursue the continuation of the operation with a revised permit or to decommission the facility, with the possibility of receiving compensation from the Hydroelectric Environmental Fund.If a permit review application is made, the permit authority's discretion is bound to the substantive rules provided in section 5(4) of the Environmental Code.What is more, the permit authority lacks the competence to outline the water management measures needed for achieving GES or GEP.Instead, it must rely on information provided in the programme of measures to the RBMP.This means that if mitigation measures are available, and if the programme of measures does not specify that the facility should be decommissioned, the permit authority must issue a revised permit, outlining those mitigation measures that enable the operation to continue.
All in all, in terms of formal legal transposition, Sweden's legislation now transposes the substantive rules on water use activities derived from Article 4 WFD.In practice, all of Sweden's hydropower facilities will undergo re-permitting to ensure the permits' compatibility with the permitting rules established in the Weser judgment.121

Other Governance Initiatives
The legislative amendments were not aimed solely at correcting deficiencies in the transposition of the WFD but formed part of a broader hydropower policy reform intended to transform the sector in line with its current socio-economic role and ecological footprint. 122The overarching aims of the policy were laid down in 2016 in a political agreement, which stated that EU law should be fully implemented but that, at the same time, continuing high hydropower production and preserving its regulation capacity are instrumental in achieving Sweden's target of 100% renewable energy by 2040. 123he legislative amendments were coupled with several other policy actions to balance various interests related to hydropowerso-called 'energy policy strategies'.
In 2014, the Swedish Energy Agency (SEA) 124 and SWaM published a national strategy for hydropower, in which 'significant adverse effect' in relation to the GEP objectives for HMWBs was defined in terms of maximum allowable impacts on the national energy system. 125The report suggested, as national thresholds for such an effect, an annual loss of more than 1.5 terrawatt-hour (TWh) (2.3%) in power generation or any adverse impact on the regulation contribution from hydropower. 126This general outline was first applied and refined in the context of the river basin district.The 2014 strategy assessed the energy and environmental value of each major river basin, laying down strategic guidelines for each basin and determining in which basin power production could take priority over environmental measures, or vice versa. 127n the second phase of application, SEA, SWaM and Svenska Kraftnät (the Swedish power grid operator) jointly published a report in 2016, which introduced the concept of 'relative regulation contribution'. 128This concept aims to illustrate the contribution of each hydropower facility to the regulation of the national electricity system.The figure would be applied in designating HMWBs, which, according to the WFD, should be carried out for individual water bodies but based on national and regional energy security considerations. 129Facilities were classified in terms of three categories: (i) operations with the highest value to the electricity system, which together account for 95% of the energy produced by the sector and 98% of the regulation contribution (255 facilities); (ii) operations where a case-to-case assessment is needed (78 facilities); and (iii) operations having the lowest value for the energy system and not contributing to the regulation of the electricity grid (approximately 1,700 facilities). 130This categorization was intended to provide a basis for designating HMWBs and for assessing the significant adverse effect in defining the focal GEP objectives.The report also urged that when the WFD allowed for flexibility, this should be maximized for the most important operations, while water management interests should be prioritized for less important facilities. 131However, the Swedish government has recently paused the review of hydropower permits and instructed the energy and water management authorities to conduct further analysis of the repercussions of the reviews for the electricity system.The government will decide later if there are grounds to revise the previous energy policy strategies. 132y nature, these energy policy strategies are not formally binding in water management or permit reviews.Yet, several informal and formal legal mechanisms were adopted as part of the 2019 legislative amendments to integrate them into water management.On the informal side, SWaM adopted new national water management guidance in 2016 in which it instructed water management authorities to adhere to the national thresholds for significant adverse effect as baselines in defining GEP for individual HMWBs affected by hydropower. 133The guidance also emphasized setting less stringent environmental objectives for some water bodies in order to stay below those thresholds. 134On the formal side, the 2019 legal reform included amendments to increase the flexibility of water management for the benefit of the hydropower sector.Firstly, permit reviews now depend on the national plan, which determines set timetables for reviews and formalizes the strategic guidelines adopted for each river basin. 135econdly, the government imposed a duty on water authorities to declare water bodies as HMWBs and apply relevant exemptions whenever the appropriate conditions are satisfied. 136The purpose of this command is to influence assessments of water managers on exemptions so that they would align with the top-down policy established in national strategies and plans.However, it has been assessed that the new policy runs the risk of leading to overly lenient application of the WFD exemptions. 137Thirdly, the legislation now includes a new mechanism for contesting and revising the EQS that form the basis for water management objectives in permit review processes.If the information provided by the permit holder indicates that a certain aspect of the water environment deviates from the original assessment based on which the EQS were set, the permitting authority must obtain a statement from the relevant water authority, which is under an obligation to make the necessary decisions on the EQS. 138The provision is designed to enable information generation in the process, as the assessments required for the permit application process are often more specific and comprehensive than those that the water management authorities are able to produce for the RBMPs. 139However, there are also reasons for scepticism regarding the underlying motive for the provision.The law provides that if the water authority finds no reason to adjust the EQS, it has to forward the case to the government.If the latter arrives at a different conclusion, it has the authority to issue regulations that overrule the water authority's decision and change the EQS. 140All in all, these mechanisms have the effect that, while the environmental courts will carry out permit reviews independently, there is increased governmental steering of the water authorities, which may have implications for permit review.141

Finland: Legal Ambiguity and Bottom-Up Processes
Hydropower is a notable energy source in Finland, accounting for around 17% of the total electricity generated in the country, with an installed capacity of approximately 3,200 MW. 142 In 2021, 86% of Finland's overall electricity generation was produced by renewable sources (53%) or nuclear power (33%). 143Finland has established a legally binding objective of achieving climate neutrality by 2035. 144In alignment with this objective, it has been recognized that the grid-balancing capacity of hydropower will play a central role in ensuring the functioning of the energy system. 145inland has around 230 commercially operated hydropower facilities, two-thirds of which are small-scale operations (<5 MW) with no grid-balancing capacity or other particular relevance to the sector's overall capacity.In addition, there is a striking number of plants (approximately 460 to 470) with a capacity of less than 0.1 MW. 146 Accordingly, fewer than 80 of the country's hydropower facilities provide a meaningful contribution to the national energy mix, to Finland's climate neutrality target, or to energy security.Despite this imbalance, Finland has not adopted substantive legal reforms to review existing hydropower permits.Instead, the country has relied mostly on bottom-up and collaborative actions between authorities, permit holders, and other stakeholders to facilitate environmental measures and, in rare instances, the removal of dams.This section analyzes this approach to water governance as it relates to the implementation of the WFD.

Implementation of the WFD in the Hydropower Sector
The WFD was transposed into Finnish legislation mainly through four pieces of legislation: the Act on Water and Marine Resources Management (WRMA, 1299/2004), 147 the Government Decree on Water Resources Management (Water Management Decree, 1040/2006), 148 the Water Act (WA, 587/2011), 149 and the Environmental Protection Act (EPA, 527/2014). 150The WRMA sets out the requirements for RBMPs and the general water management objectives largely following the wording of the WFD, while water body-specific objectives are defined in the RBMPs.Hydropower operations are covered in the permit system of the WA.This division is also visible in the competences of the relevant state authorities.While Centres for Economic Development, Transport and the Environment (ELY centres) act as water management authorities, permitting falls within the competence of Regional State Administrative Agencies.
In the original transposition, the WFD objectives were not considered to have binding legal effect on water-use activities. 151Quite the contrary, the national preparatory materials underscored that RBMPs have no direct effect on the granting of permits, let alone the review of existing permits. 152The WA stipulates only that, in the permitting process for new projects, the competent authority must consider the factors established in the relevant RBMP. 153Tellingly, the preconditions for reviewing and updating hydropower permits established in the WA make no reference whatsoever to RBMPs or water management objectives.Following the Weser judgment, the Finnish Supreme Administrative Court (SAC) established in its case law that the environmental objectives of the WFD are binding on the WA permit process for new projects. 154owever, no case law exists on the legal implications of these objectives for permit reviews.
Moreover, like Sweden, Finland's water law traditionally incorporates a doctrine of strong permanence for hydropower permits: permits are granted for an unlimited duration and cannot be revoked without the permit holder's consent. 155Even a review of permit requirements is allowed under limited conditions related to material changes in circumstances. 156Such circumstances have been argued potentially to encompass the need to mitigate the adverse effects of hydropower pursuant to Finland's obligations under EU law. 157However, in the absence of any precedent from the SAC, it remains unclear whether this interpretation would hold up in court.The traditionally strong permanence doctrine calls for restrictive interpretation of any provisions that would deviate from the presumptive permanence of the original permit decision. 158Remarkably, the current permit review system requires authorities to conduct studies and apply for permit reviews, which are very burdensome and time-consuming processes. 159omplicating implementation of the WFD further, the general rule in Finnish water law is that the water legislation that was in force when a project was initiated and permitted continues to apply to the operation even if the legislation has been revised or repealed, unless the new legislation specifically states otherwise. 160As all hydropower operations currently active in Finland were permitted under older legislation, the current preconditions under the WA for reviewing permits do not automatically apply to any facility. 161Yet, the WA includes transitional provisions that allow its permit review provisions to be applied to older permits if certain additional preconditions are met, including the requirement that the review is considered necessary in the public interest. 162In practice, this means that when the authorities seek to initiate reviews for the oldest permitsthose often most acutely in need of revisionthey need to invoke extensive justifications for doing so.This being the case, it has proven almost impossible to introduce new requirements in a permit review for small and medium-sized hydropower plants that entirely lack river connectivity and fisheries measures (so-called zero-requirement permits). 163Recently, however, a committee organized under the Ministry of Justice put forward a proposal to amend the WA in this respect. 164It addresses only the most pressing issue in the sectorzero-requirement permitsand thus will not create a more agile system for permit reviews, although a comprehensive system is needed.
One underlying reason for the strong permanence accorded to hydropower permits in the Finnish water law tradition is that the power associated with water running in a river is considered private property. 165While rights to this property originally belong to the riparian landowners, the WA permit process allows hydropower operators to purchase or lease these rights to utilize the river in energy production. 166Accordingly, operators have legal protection based on the right to property for their use of the water flows within the limits of the permit.This being the case, a permit review is generally possible only when it will not significantly reduce the benefit gained from the facility or when the permit holder is fully compensated for other than minor financial losses. 167lthough the European Commission has repeatedly urged Finland to review hydropower permits,168 permit review has received little attention in the Finnish RBMPs.In the current programmes of measures, certain measures, such as dam bypasses and improved ecological flows, have been put forward at the general level. 169However, apart from a few exceptions, the required facility-level permit review processes have not been specified in the programmes or initiated in practice.As a result of the extensive legal hurdles described above, only a few hydropower permit reviews have been initiated during implementation of the WFD.The Kemijoki and Iijoki riverswhich accommodate eight and five large hydropower dams, respectivelyare two prominent cases where conditions of fisheries are being updated, albeit in a process that started in 2017 and is still ongoing. 170More recently, a permit review application has been submitted regarding two hydropower operations on the Kymijoki river in South-East Finland. 171While these will probably be trailblazer cases, the Kemijoki and Iijoki examples also illustrate how much time and effort permit reviews require of the Finnish authorities.
Given the stagnation in the legal framework on permit review, Finnish water management has leaned towards attempts to justify the lack of progress in the sector.Many of the riverine water bodies dammed for hydropower generation have been classified as heavily modified.The legal challenge from a WFD perspective is that there is no clear national definition for what constitutes a 'significant adverse effect' for the energy system in defining GEP objectives. 172Moreover, the actual decision making in designating a given water body an HMWB and establishing its GEP objectives is handled primarily by 'expert judgment' in the preparation of RBMPs. 173However, these typically lack a thorough review of alternative electricity generation methods or any overall perspective on the needs of the national energy system.Finally, the assessment of a 'significant adverse effect' is carried out on a case-by-case basis for each hydropower operation, with a primary focus on the operator's financial situation and the costs of mitigation measures, rather than considering the facility's broader societal benefits. 174BMPs in Finland have also made use of the exemptions allowed under the WFD.At present, notwithstanding the less-demanding ecological quality criteria for HMWBs, 66% of Finland's HMWBs fail to comply with GEP. 175Thus far, Finland has applied extensions to the deadline for reaching GES and GEP until 2027, but it has chosen not to set less stringent environmental objectives. 176However, Finland will presumably be forced to invoke the latter option from 2027 onwards, as the third cycle of RBMPs contains rather few concrete measures to mitigate the pressure from hydropower and the legal setting poses challenges in taking any measures.There are, however, no national policy guidelines on applying less stringent environmental objectives in the case of hydropower that would ensure that the overall energy system and alternative energy generation methods are given due consideration.

Other Governance Initiatives
Because of the limitations of the current legal framework on implementing the WFD, the past decades have witnessed other policy efforts to revitalize migratory fish stocks and restore ecological flows to Finnish rivers.Firstly, in 2012, the Finnish government issued a National Fishway Strategy, which was designed to restore the natural reproductive cycle of migratory fish populations and prioritize watersheds with the highest potential in this respect. 177The Strategy includes both funding and guidance for the public authorities to aid river restoration projects and to take on re-permitting processes.Overall, the ambitious goals of the strategy remain largely unrealized even a decade after its introduction, not least because of the legal challenges associated with initiating permit reviews.
Secondly, in the spirit of the 2012 Strategy, the current NOUSU Programme, funded by the government, focuses on removing barriers to fish migrations. 178To date, the programme has already succeeded in removing several dams and in funding measures to create bypass channels and enhance ecological flows. 179Among other things, the NOUSU Programme provides leverage funding for collaborative processes that aim to remove small hydropower dams.The programme is voluntary for hydropower facility owners.It makes use of a specific, science-based hydropower value assessment tool to establish the present net value of the facility. 180Determining the value of a hydropower facility is an essential element of negotiations for dam deconstruction, and the removal of a dam can often be timed to coincide with major environmental or technical investments in hydropower to minimize the use of public funding for removal. 181hirdly, Watershed Visionsa set of collaborative governance processes to reconcile conflicting interests concerning the use of riversis another example of a governance initiative that extends beyond formal law. 182The processes are typically initiated by regional authorities and engage with hydropower operators and civil society actors. 183he objective is to design a long-term programme for the achievement of shared water use and protection interests.Processes of this nature may also facilitate measures to improve river connectivity. 184One of the most notable examples of a Watershed Vision process enhancing hydropower adaptation in Finland is the initiative implemented on the Iijoki river between 2016 and 2018. 185As the Iijoki has five large hydropower facilities, migratory fish protection measures were one of the central elements in the process.The vision is that solutions that enable migratory fish to move upstream and downstream will enable natural reproduction of migratory fish by 2030.To this end, fish passes and downstream migration solutions need to be built, spawning areas must be restored, and energy production and fish migration must be balanced.To support these solutions, an advisory committee has been set up with representatives of the municipalities and organizations in the Iijoki region. 186urprisingly, the vision for the Iijoki does not address the permit reviews needed, even though a review process was under way in the region at the same time as the vision was elaborated.
To sum up, the Finnish framework includes some promising voluntary processes that may enhance fish migration.In particular, the NOUSU Programme has led to concrete dam removals and mitigation measures, while Watershed Visions have provided a promising avenue to balance various river uses and protection interests in the long term.These voluntary processes are often driven by the government or regional authorities.They can be described as collaborative, bottom-up processes in that they are voluntary and participatory, and their governance objectives are decided in a collective decision-making process instead of being set out in the law. 187Nevertheless, these processes also clearly operate in the shadow of the law, as the current permit conditions, the possibilities and limitations of permit reviews provided in the law, and the legal weight of the water management objectives may influence their results. 188

Discussion
Although Sweden and Finland have both been characterized as model students in the implementation of EU law in general, 189 the WFD requirements on hydropower have posed a major challenge for both countries.The Directive's review requirement for existing hydropower permits ran against the water law frameworks of both countries, which had incorporated a strong permanence for hydropower permits that shielded permits from revision. 190Interestingly, despite having clearly similar legal and constitutional frameworks, as well as administrative and institutional structures, 191 the two countries are remarkably different in the changes that they instituted in order to implement the substantive requirements of the WFD for hydropower.
Sweden has conducted a comprehensive regulatory overhaul, introducing a systemic approach to renewing hydropower permits.In practice, it has abandoned its former permanence doctrine: it now requires permit holders to apply for re-permitting and it is the hydropower sector, rather than the government, that compensates individual operators for subsequent financial losses.Driven by the Commission's infringement actions, these developments significantly improve the legal transposition of WFD requirements on re-permitting hydropower.Yet, while this top-down, government-led model contributes to the effective implementation of the Directive, little or no discretion is left for formulating policies at the regional and local levels or for collaborative initiatives, processes that initially were to be the core of the river basin governance approach of the WFD. 192inland, for its part, still faces considerable challenges in the formal transposition and implementation of the WFD, as legislation concerning the re-permitting of hydropower operations has shown a conspicuous lack of progress during the Directive's implementation.In stark contrast to the Swedish system, it seems that Finland has adopted a more bottom-up, case-by-case approach, which relies on governmental programmes, funding, and guidance to promote the achievement of the WFD objectives.While strong on subsidiarity, the Finnish framework hardly qualifies as appropriate implementation of the WFD, as it lacks the necessary safeguards to ensure effective and proper fulfilment of its requirements.The Finnish approach also contains a paradox in that its interest in bottom-up governance has been sparked by the ineffectiveness of the national government.However, the effectiveness of that governance depends ultimately on the involvement of the government, not the least by providing sufficient legal regulation to enable taking measures to address the challenges. 193rom a comparative perspective, some specific elements in the implementation of the WFD merit a closer look.The Swedish governance framework constitutes a systems approach.Ecological requirements and the needs of the energy system are reconciled top-down, and the outcome of this process is then translated into individual water management decisions and permit reviews.With respect to implementation of the WFD, the country's central government aims to ensure that ecological objectives may be relaxed only to serve the society's general interests.In Finland, the case-by-case approach followed at the river-basin level, which lacks clear guidance from central government, has failed to generate a comparable systems perspective on hydropower governance.This shortcoming can undermine implementation of the WFD, including in designating water bodies as HMWBs, defining GEP objectives, and applying exemptions to accommodate operators' interests over the general interests of society.This bias also risks creating yet another policy construct that shields hydropower from change.
Yet, Sweden's formalized thresholds for establishing the significant adverse effect that warrants the designation of a water body as a HMWB also protect the stability of operations and may prevent their adaptation in response to future developments in the energy system. 194The structure of energy supply will presumably evolve as production from other renewable sources increases and power grid-balancing technologies further develop during the 25-year implementation period of the national plan.Nevertheless, it is unclear whether policy can be adapted to the developments envisaged.This entails the risk that Sweden will still not meet the demands of the WFD for adaptive, periodic assessment of HMWBs, GEP definitions, and less stringent environmental objectives. 195n Finland, these parameters are updated, if necessary, every six years in the RBMPs.They couldat least in theorykeep pace with technological developments and new knowledge, but the lack of a systems perspective threatens to undermine these aspirations.What is more, the Finnish governance model is perhaps more susceptible to shortterm disruptions than is the Swedish model, as illustrated by the energy crisis following the Russian invasion of Ukraine.The threat of a power shortage and the rising price of electricity made hydropower more profitable and reduced the willingness of hydropower owners to engage in negotiations under the NOUSU Programme about the government purchasing and deconstructing facilities. 196Yet, the energy crisis has had an impact on the Swedish regime, too, as the government has recently proposed suspending permit reviews for at least a year because of the situation of the energy market. 197However, it is now evident that this concession was only a short-term response to what was an instantaneous shock, as electricity prices have now stabilized in both countries.In the bigger picture, the energy transition predominantly entails developing other sources of energy. 198In turn, the hydropower sector continues to face calls for structural changes and adaptation based on the urgency of addressing biodiversity loss and degradation of aquatic ecosystems. 199or numerous water bodies affected by hydropower in both countries, the attainment of GES or GEP is unlikely within the 2027 time frame required by the WFD.After that deadline, Member States cannot legitimately extend the deadlines for achieving the WFD objectives to postpone the necessary water management measuressuch as permit reviewsas further extensions are allowed based only on natural conditions prevailing in the water bodies.In practice, this leaves Member States with two options: (i) taking the risk of non-compliance and infringement actions by continuing water management efforts without proper justification for the delays in water management measures and realizing the water management objectives, or (ii) invoking Article 4(5) of the Directive and setting less stringent environmental objectives for all water bodies, in cases where the 2027 deadline was not met based on failure to implement the necessary measures on time.
In Sweden, the permit reviews will take approximately 25 years, according to the national plan, which means that some measures to reach GES or GEP will not be implemented until the period between the 2030s and 2050s. 200This approach appears to illustrate the first option in addressing the 2027 deadline.At the same time, however, Sweden is moving towards a large-scale application of Article 4(5) WFD, as less stringent environmental objectives will be set for several water bodies to protect the power generation and regulation contribution of the largest hydropower facilities.In Finland, the measures necessary to mitigate the pressure from hydropower and to achieve GES and GEP were not outlined in the third cycle of RBMPs.Furthermore, these measures will not be implemented before 2027 as a result of the inadequate legal framework and the slow pace of the few ongoing review processes.Although Finland has not set less stringent environmental objectives for any river system to date, the next RBMPs are most likely to exercise the second option in accommodating the WFD's 2027 deadline.This approach includes a large-scale application of less stringent environmental objectives as a result of the slow and virtually non-existent progress in enhancing water status in water bodies affected by hydropower.It is questionable, however, whether the European Commission agrees that the grounds for applying Article 4(5) WFD are met if and when few efforts have been made to mitigate the pressures during the previous three river-basin management cycles.
In both countries, the effectiveness of existing governance arrangements in protecting riverine ecosystems remains unclear.Although Swedish policy ensures that all hydropower permits will be reviewed, the reviews still have to be carried out.While Swedish law now allows revocation of permits, it is still uncertain whether this option will be utilized to free at least some rivers completely.Merely amending existing permits to include mitigation measuresthe effectiveness of which is not guaranteedmight not produce the most effective ecological or economic outcome. 201Conversely, in Finland, there is significant uncertainty regarding the effectiveness of the governance model.While the NOUSU Programme and Watershed Visions can target the most important watersheds, which makes it possible to free smaller rivers completely, the outcome of those efforts depends on the cooperation of hydropower operators, and the availability of public and private funding.Currently, it is unclear whether mitigation measures can be incorporated into (m)any permits because of the vagueness of the legislation and the lengthy duration of permit review processes.

Conclusion
Despite the ambitions of the WFD, thus far it has not been entirely successful in promoting transformative changes in key water-use sectors, and its implementation has produced little improvement in the aquatic environment. 202In general, the difficulties that legal instruments such as the WFD face in trying to reconcile aspirations of more flexible and adaptive governance approaches with traditional legal requirements are well known. 203This article has provided an analysis of the challenges faced by the WFD in this respect both in relation to the national constitutional and water law traditions of two EU Member States and in fitting the Directive into the general EU legal system frames in the context of one of the key pressure sectors, hydropower.
Based on our analysis, we argue that the innovative governance approach of the WFD has met considerable challenges in forging a transformation in conventional legal settings at the national level in both Finland and Sweden.Finland's experiences highlight challenges to the Directive's bottom-up policy aspirations: its governance approach and aspirations of flexibility have met expectations but have failed to trigger notable changes in traditional legal structures or improvement in water status.As the example of Sweden shows, the WFD has responded to these realities and developed towards being a more traditional, formalistic legal instrument, enabling it to increase the legal enforceability of its requirements through EU infringement proceedings.While now more effective in transforming hydropower policy, the implementation of the Directive, however, has lost certain crucial characteristics of a governance approach in EU law, including adaptive capacity and policy formulation at the river-basin district level.
Member States are confronted with somewhat contradictory mandates in the formulation and implementation of water management policies, which are not easily reconciled.On the one hand, they have to meet the WFD's initial demands for flexible, bottom-up management policies while, on the other hand, they must fulfil the general EU law requirements of legal effectiveness and formalism.In both Sweden and Finland, this impasse has resulted in extensive use of exemptions from the water management objectives, but for different reasons.
In Sweden, the hydropower policy is attempting to effectively implement the WFD by stipulating strict legal requirements for permit reviews.Simultaneously, the government is employing strategic and extensive use of the exemptions to reduce the sector's overall responsibilities.Conversely, legislators and policy-makers in Finland have failed to make the legislative and other reforms necessary to implement measures on hydropower.Because of the limitations of national legislation, water management authorities do not really have the necessary tools to tackle the problem and need to resort to exemptions to justify the lack of progress.Accordingly, the comparison shows concretely how the legal challenges shaping the WFD's implementation have created a structural problem: the overuse of exemptions, which has become one of the main reasons for the lack of progress in realizing the Union's ecological ambitions. 204It remains to be seen whether the Commission will try to remedy this by pushing Member States towards more formal implementation outcomes, including by initiating infringement proceedings against Finland for its failure to ensure reviews of hydropower permits, as it did with Sweden.