The Dutch Ministry of Infrastructure and the Environment plans to make two amendments to the Dutch Emissions Trading Scheme (Regeling handel in emissierechten), which has been in force since 5 December 2012. That scheme implements the European system of trade in greenhouse gas emission allowances, which is laid down in EU directives, regulations and decision and in the Dutch Environmental Management Act (Wet milieubeheer). This online consultation offers interested parties the opportunity to comment on the draft amendments until 6 November 2017. Those amendments will predominantly affect ETS companies and traders in emission allowances (e.g. large energy-intensive companies in the power sector, refining industry, chemical industry and metal industry), verification institutions and the Dutch Accreditation Council, which means that they have an interest in commenting on the amendments. Below we explain the upcoming amendments.
Trade in greenhouse gas emission allowances
The EU Emissions Trading System (EU ETS), which is an EU directive, is a market instrument used by the EU in an attempt to reduce the emission of greenhouse gasses in a cost-effective manner by means of trading gas emission allowances. The purpose of the EU ETS is to achieve EU targets and the targets set by the Kyoto Protocol. The Paris Climate Agreement also underlines greenhouse gas reduction as one of its principal objectives. The specific ambitions for the Netherlands in this area are laid down in the Energy Agreement, the Energy Agenda and, not to forget, the brand-new Coalition Agreement. The Coalition Agreement states the desire to arrive at a national climate and energy agreement that aims to achieve a reduction of 49% by 2030.
Each year, companies that participate in the EU system are granted a specific number of emission allowances free of charge. For each tonne of greenhouse gas that they emit, companies must return the matching number of emission allowances. If companies emit less gas than the number of allowances they have been granted in their free packages, they may sell their surplus allowances to companies whose gas emissions exceed their respective allowances. This is a financial incentive to give priority to emission-reducing technology (or to invest in such technology), such as electrification in the chemical industry and using Power-to-Gas for energy storage, which converts electricity into the carbon-free fuels hydrogen and synthetic natural gas. In addition, under a decision of the European Commission, the cap established by the EU will be reduced over time, reducing the total emission in due course. The purpose of this mechanism is to achieve an emissions level which, in conjunction with other instruments, will contribute to the ambitious sustainability targets set forth in the Kyoto Agreement.
The envisaged amendments are twofold
The first amendment to the Scheme will enable independent accreditation of verifiers for a new category of activities: verifying data that serve to substantiate applications submitted to the Dutch Emissions Authority (NEa) to be granted free emission allowances.
Validation/verification institutions will objectively assess the data underlying such applications. The purpose of this amendment is to introduce an accreditation obligation in that respect, which will expand the scope of the existing accreditation obligation (for verifying emission reports) for those institutions. The purpose of accreditation is to demonstrate verifiers’ expertise, neutrality and independence. Therefore, expanding the scope of the accreditation requirement should lead to even more certainty regarding the reliability of data provided and consequently the accuracy of the eventual grant. The quality of that data is of paramount importance, since in the Netherlands granting emission allowances free of charge involves an estimated EUR 1.5 to 3 billion. A transitional period will apply until 1 July 2018, during which period verifiers can apply for an expansion of their accreditations and go through the accreditation process. After that period has elapsed, verifiers must be accredited for this work, just as they must be accredited for emission reports.
The second amendment concerns the fee that is paid to the NEa for having a trading account, personal holding account or Kyoto account. These accounts are used for voluntarily trading emission allowances. The Minister believes that the current fee of EUR 200 per year is low compared with other Member States and that it is furthermore insufficient to cover the costs incurred by the NEa in connection with the significant increase in its workload. Under the envisaged amendment, the fee will be raised to EUR 400 per year. It is worth noting that the consultation document lacks substantiation for these figures and the fee increase.