The once-trailblazing Dutch Nitrogen Oxides Emission Trading Scheme (NOx ETS) is to be repealed: what are the effects?

In recent years, Emissions Trading Schemes have gained momentum around the world. Hundreds upon thousands of companies have had to adapt to be able to handle the effects of more stringent regulation. The Netherlands pioneered the launch of the world’s first NOx ETS in 2005. However, in October 2012, the scheme reached its breaking point and its repeal was officially announced.

This leaves us with several questions:

• What happened?
• Why has the scheme been repealed?
• How will companies be affected?
• Will there be something else instead of the NOx ETS?
• Does the example in the Netherlands spell doom for other regional or global ETS?

This article will explain the NOx ETS and hopes to find answers to these questions.

What is the NOx ETS?

The Dutch NOx ETS, which is not part of the EU Emissions Trading Scheme (EU ETS), aimed to reduce NOx emissions in the Netherlands. This should have led to the Netherlands meeting the NOx emission ceiling of 260 kilotonnes by 2010, as laid down in EU Directive 2001/81/EC on national emission ceilings for certain atmospheric pollutants. Although the Netherlands could not meet the initial 2010 deadline, the limit requirement was finally met in 2012.

There are two reasons why the Dutch government introduced the NOx ETS in 2005:

• It was felt at the time that the best available techniques (BAT) applied in companies emitting NOx on the basis of their environmental permits were not sufficient to reduce NOx emissions; and
• The EU was considering the inclusion of NOx in the EU ETS. This would have led to an amendment of the EU Directive concerning Integrated Pollution Prevention and Control (IPPC). As a result, companies taking part in the Dutch NOx ETS would no longer need to comply with the NOx emission limit values as specified in their environmental permit. Participation in the NOx ETS would be enough to reduce NOx emissions.
  However, in 2011 the EU decided not to include NOx in the EU ETS and the expected amendment to the IPPC-Directive was never made.

Why has it been repealed?

The Dutch government outlined three main reasons in its proposal for the planned repeal of the NOx ETS, namely:

1. The NOx ETS is not functioning properly. The NOx emission limit value as laid down in EU legislation was finally met in 2012 (two years after the 2010 deadline). However, this was mainly attributable to the use of BAT, which had been improved over recent years, instead of the trading of emission allowances under the NOx ETS.

As a result of companies applying BAT, NOx emissions were reduced, which led to fewer companies needing NOx allowances. One allowance gives a company the right to emit one tonne of NOx. As a consequence of the emissions reductions achieved by other means, there is a large oversupply of NOx emission allowances and the price of a NOx allowance is very low (for example, EUR 0.11 per kilo of NOx instead of EUR 2 per kilo in 2011)

2. It is impossible to maintain an ETS for NOx. Under EU legislation (IPPC-Directive) NOx emissions from IPPC installations must comply with the emission limit values based on BAT. These emission limit values are laid down in environmental permits. As companies were legally obliged to comply with the emission limits in their permits it meant that in practice the number of emission allowances they could buy to exceed these limits was very limited. Therefore, the Dutch government concluded it was not effective in practice to trade emission rights between companies that emit more NOx than permitted and companies that emit less NOx.

3. The repeal will save EUR 6 million for companies and EUR 1 million for public authorities. There are money savings as many requirements that currently apply to companies and public authorities with will cease to exist (e.g., holding and issuing of emission permits).

In addition, the Dutch government points out that the aforementioned problems do not exist for the EU ETS, because it is an EU-wide trading system and no emission limit values are laid down in EU Directive 2010/75/EU on industrial emissions (repealing the IPPC-Directive) for the greenhouse gases in question (carbon dioxide (CO2), perfluorocarbons (PFCs) and nitrous oxide (N2O)).

The Transition Period

The Dutch NOx ETS will cease operating on 1 January 2014. This means that in practice companies still need to have an emission permit, monitor and report on their emissions, etc. until 1 January 2014. However, since October 2012 some less stringent requirements have been applied (mainly monitoring requirements).

What happens after 2014?

Although the NOx ETS will cease to exist, all of the requirements under the scheme are not disappearing completely.

Companies with NOx installations will still need to:

• meet emission limit values;
• use correct measurement methods; and
• keep data on these emissions available for their competent authority (for example, Provincial or Municipal Executive).

These requirements can be laid down in their environmental permit and/or in the Decision on General requirements for facilities environmental management also known as the Activities Decision.

Therefore, after 1 January 2014, companies participating under the NOx ETS will no longer need to:

• hold an emission permit from the Dutch Emissions Authority;
• monitor their NOx emissions;
• submit a verified emissions report to Dutch Emissions Authority;
• submit details of the number of emission allowances corresponding to the quantity of the emission of NOx emitted in the previous year; and
• have a registered account to take part in the trading of the NOx emission allowances.

Effects of NOx ETS Repeal

Currently, 369 companies including refineries, electricity plants, and (petro)chemical companies are participating in the NOx ETS. These companies are already experiencing less stringent monitoring requirements since October 2012 as they prepare for the phase out in 2014.

The complete phasing out of the NOx ETS will lead to a reduction in company costs and the associated administrative burden. For example, companies will no longer need to apply for an emission permit, which is estimated to result in total savings of EUR 5,222,003 across participating companies. In addition, the surrendering of NOx emission allowances will no longer need to take place, which will lead to a total saving of EUR 76,995 across participating companies.

Thus, there will be significant cost savings for companies within the Netherlands and for public authorities. Furthermore, some requirements are not going away and are implemented in other legislation. However, in general the idea of NOx ETS did not work for the Netherlands and this ETS will therefore be repealed on 1 January 2014.

The repeal of the Dutch NOx ETS raises questions on the perception of using Emissions Trading Schemes around the world to reduce emissions, even though these other schemes are very different from the Dutch NOx ETS. As more countries see the necessity of taking measures to reduce their greenhouse gas emissions, it will be interesting to see if they use the Dutch NOx ETS in arguing for or against ETS legislation in their respective countries.

About the Author

Marlies Huijbers is a Regulatory Consultant at Enhesa and is based in Brussels. She is a Dutch/European-trained EHS regulatory expert with over 5 years of professional experience. She specialises in Dutch, the former Dutch Antilles’, Suriname and European EHS law. Ms Huijbers’ key experience includes development and maintenance of audit protocols, country profiles, regulatory registers; monitoring regulatory developments; and advising multinational clients on how to maintain compliance. She holds a Master’s degree in Environmental Law from the University of Amsterdam and a Master’s degree in International and European Law from the Radboud University Nijmegen. She speaks Dutch, English, French and German.

Photograph: Tulip Dream 3, Tulips in Holland by Paulo Oliveira Santos, Rotterdam, Zuid Holland, Netherlands.

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