Experiences with the Dutch NOx trading system Kees Hoppener Ministry of Environment Brussels, 3 April 2009

Contents of the presentations History How it works Lessons learned

Fact and figures National system Started at 1-6-2005 About 350 installations involved: Combustion plants in all industrial installations>20 MWth (i.e. power plants, refineries, chemical plats etc. or 85% of industrial emission) Industrial processes within industrial installations (15% of industrial NOx emissions) glass manufacturing, steel production, nitrogen acid production Strong integration of ETS and NOx- trading (80 – 90 %) caused by fossil fuels

Why NOx emission trading? NOx is difficult as well local as trans-boundary effects Stringent NOx-ceiling (NECD 2010) Request by the industry for more flexible approaches NEPP: more market based instruments Permanent reward for pro-active, good environmental behaviour

a new phenomenon IPPCD gives ELV’s by source= relative approach NECD gives maximum emission ceilings = absolute approach Trading = a solution to distribute space under an emission ceiling or absolute cap

Goals of NOx emission trading Reduction based on cost-effectiveness  Distribution of the costs: the polluter pays Flexible allocation of the room under the NOx-emission ceiling Compliance with the NOx-ceiling Uniformity in practice: one-stop shop

PSR 2010, 40 g/GJ PSR 2020, 27.5 g/GJ ? Tough challenges Bron: Vrom 2006

Allocation of allowances Yearly allocation of NOx allowances based on a Baseline&Credit (B&C) approach performance standard rate (PSR): grams of NOx allowances per unit of energy (GJ) input in the facility or per produced products (ton product) a general binding rule: yearly the value PSR goes downwards 2005: 68 gr/GJ --- 2013: 37 gr/GJ

performance standard rate (PSR)

NOx-emission trading: year by year – similarities with EU ETS compliance requirements 1a. Submit verified annual emission report 1b. Register the allowances 1c. Confirm of the data by a verifier Year x 1 January budget period x Trading period x 31 March 2. Hand in NOx allowances x + 1

How does it work? shortage: buy or measures surplus:Sell or Measures, sell or buy shortage: buy or measures 1200 surplus:Sell or Save permits 1000 800

Balance after 4 years cost-effectiveness? limited by the IPPC-permits Settlement of the costs? Yes there are buyers and sellers Flexible distribution of the available emissions space? allocation of emission allowances functions well Enforcement of NECD? a political linking between allocation and the NECD-ceiling One-stop shop? Dutch emission authority for NOx trading whereas for IPPC industrial installations 20 licensing authority

Is everybody happy: industry Too many allowances in the market Complaining on the burden of monitoring and reports Complaining on double regulation: IPPCD and emission trading Lack of flexibility caused by the command and control approach of the IPPCD

Is everybody happy: authorities High quality of monitoring of NOx – would not have been possible without ETS possibility to enforce the NECD The relation between the IPPC and emission trading is not clear: State Advisory Council took very principled position In 2010 the market is expected to be in balance: the price will rise more incentives The budget period of NECD is too short to provide sufficient support

Future for the Dutch NOx trading system? An European directive to structure NOx-trading would be highly welcomed Emission trading needs room and flexibility under the IPPC Emission trading is the only way to guarantee ambitious objectives in future command and control approach is coming to a dead end for NOx and SOx Special attention for local air quality A long tem budget period under the NECD

Alternatives for trading? Temporary licences: on going sharpening of the ELV’s NOx an SO2 tax system Denying the problem and window dressing

Thanks for your attention Are there any questions? Now Or later: Programme leader Industry & Air pollution Climate & Air quality Directorate Ministry of Housing, Spatial Planning and the Environment P.O. box 20951 2500 EZ The Hague Internal P.O. box 650 The Netherlands phone: 070 -339 4420 mobile: 06 - 44 11 27 26 @: cees.hoppener@minvrom.nl