On 19 May 2018 the Minister of Economic Affairs and Climate Policy (hereinafter: ‘the Minister’) published its draft bill (in Dutch only) on the Prohibition of the use of coal by power producers for public consultation (hereinafter: ‘the draft bill’).

Below you will find a short background together with an outline of the draft bill and we conclude with a possible timeline of the legislative process.

Background

The basis of the draft bill derives from international (the Paris Agreement in 2015) and national (the coalition agreement among others) initiatives to counter climate change developments. In its coalition agreement the government committed itself to taking measures to ensure reduction of carbon dioxide-emissions by at least 49% in 2030 (compared to emission levels in 1990) (the required percentage on EU level for the Netherlands was established at 40%).

The government refers to studies that show that power generated by coal-fired power plants contribute to approximately 29,5 megaton of carbon dioxide-emissions in 2016 (compared to half of the amount emitted by gas-fired power plants), making it evidently important to ban the use of coal, according to Dutch government.

Outline of the draft bill

The draft bill envisages a ban on the use of coal as fuel for power plants. This will ensure the phase-out of coal-fired power plants in 2030 at the latest.

Classification of power plants by net electrical efficiency

To guarantee a reasonable transition period for the five currently operational coal-fired power plants, the Minister classified the eligible coal-fired power plants by net electrical efficiency in relation to the transition period/closing date:

  • Power plants with a net electrical efficiency of less than 40% are prohibited immediately (at the moment all existing coal-fired power plants have a higher efficiency);
  • Power plants with a net electrical efficiency between 40% and 44% will be prohibited to use coal as per 1 January 2025 (two power plants fall within this category: the Amercentrale (owned by RWE) and Centrale Hemweg (owned by Nuon Vattenfall);
  • Power plants with a net electrical efficiency of 44% or more have an extended term of 1 January 2030 to stop the use of coal for their power generation. Three power plants fall within this third and last category: 1) Engie Centrale Rotterdam (operated by Engie and in operation since 2015); 2) Centrale Maasvlakte (operated by Uniper and in operation since 2016); and 3) Eemshavencentrale (operated by RWE and in operation since 2015).

The draft bill describes how the net electrical efficiency is calculated, also taking into account whether a power plant uses other (bio)fuels to generate power or supplies heat to a heat distribution system next to its power generation.

Compensatory measures?

The draft bill takes into account (in line with article 1, First Protocol of the European Convention on Human Rights providing the right to peaceful enjoyment of property) that in case a power plant operator can prove that it is - compared to other coal-fired power plant operators –, individually and adversely affected by the prohibition of the use of coal, the Minister can, on request, grant a compensation.

Timeline legislative process

The draft bill is open for public consultation up and until 16 June 2018. Subsequently, the Minister will take into consideration the received comments and documents and will then submit the final bill to Parliament. Since the Minister is keen on an expeditious parliamentary debate and the fact that the draft bill already assumes an entry into force date in 2019, it is in our view most probable that the Minister will submit the finalised bill after this summer recess period.

Also noteworthy: after passage of the bill through Parliament, the (then) act will enter into force immediately.