1. Integrating NOx - CO2 Emissions trading in the Netherlands
Lessons learned
Chris Dekkers
Directorate of Climate Change & Industry
Ministry of Environment (VROM)

2. Why integrate NOx - CO2 Very essence of NOx & CO2 emission reductions:
90%+ of NOx emissions directly related to use of fossil fuels -- as for CO2
Very essence of NOx & CO2 emission reductions:
Long term aim of CO2 emission reductions through much higher energy efficiency and use new energy sources
Aim for NOx: much higher NOx efficiency of energy use and possibly other energy sources

6. ET: bringing ambitions into realisation
Ambitious long term targets out of reach
NOx emission reductions of 50% (2010) to 75% (2020)
Wide variety and range of technical, economic and environmental reduction options (fuel switch, in-process, after-treatment) >> thereto not suited for command & control type of regulation
Long-term CO2 & GHG emission reductions 50-60% (2050)
Targets require robust system to distribute reduction efforts & costs over emitting sectors/polluters
Emissions trading is complex: requires major adjustment of legislative structure and existing organisation based on command & control
Emissions trading requires redefinition of Public domain

7. Integrating Two Emissions Trading Schemes
1997 start national discussion NOx emissions trading
2000 political decision on 2010 targets through emission trading (ET)
: Development national NOx ET system with PSR approach parallel to development of EU system of CO2 emissions trading
: Solving conceptual adjustments to integrate NOx and CO2 emissions trading in one legislative, permitting and monitoring structure. April 2004: State Advisory Council advised to separate NOx –CO2 into two separate legal proposals to Parliament.
July 2004: CO2 legislation accepted by Parliament 28th September: conditions fulfilled for full start on
Mid September: NOx legislation to Parliament, start March-April 2005

8. Two emissions trading schemes
Involves all 250/350 industrial facilities > 20 MWth
All Power industry (gas, coal, CHP’s)
Refineries (5)
Chemical industry (20 major – 100 SBE’s)
Steel (1 major and 4 medium-sized players)
Glass (15), Cement (1), Paper (10), Food Processing and others
NOx: PSR approach to achieve target of 55 kilotons in % reduction of 1995-level
CO2: Cap & Trade system based on historic emissions ( )

9. Similarities NOx - CO2 ET
Netherlands Emissions Authority (NEa) as Competent Authority for NOx and CO2
One emission permit required for NOx and CO2
One approved monitoring protocol for NOx - CO2
Last year’s emissions in report before 31st of March
Surrendering CO2 and/or NOx emission rights equivalent to last year’s emissions on 30st April

10. Differences of NOx - CO2 ET’s
Targets:
NOx target 2010 = 75% reduction relative to 1990
CO2: in 2d period 8% relative to 1990 levels
Allocation:
NOx: automatically based on PSR x fuel use
CO2: grandfathering based on historic emissions
Acquiring allowances:
CO2: allowances entered into CO2 registry at start of the year
NOx: allowances entered into NOx registry on basis of verified emissions report (after the year)

11. Performance Standard Rate (PSR)
2010 NOx Target:
55 Ktonnes =
40 g/GJ
1350 PJ
Projected 2010 Fossil Fuel Use

12. 68 63 58 52 46 40 PSR instrumental to reductions 199594 68 63 58 52 46 40
At some key point, there should be milestone years to assess progress.
1995

13. Allocation per facility
Allocation of rights (allocation) in any year (2010):
Perfomance standard (PSR) times fuel use
1200
ton
NOx
Energy input
installation/facility 20 PJ
PSR(60) =
Automatically allocated emission rights

14. Emissions equal rights
Emissions shortage
requires buying
Actual emission Nox are to equal
total rights allocated or acquired
1400
Emission surplus
Allowing to sell
1200
1000
Emissions
higher than
rights acquired
Emissions
Less than rights
Total acquired
number of emission rights

15. Planning in Time Amendment EMA : Chapter 16 emissions trading
Publication 1rst draft for public hearing March 2003
December 2003 integrated legislative proposal to Cabinet
March 2004: State Advisory Council advised to split NOx and CO2
CO2 amendment EMA agreed by Lower House mid June and by Senate 28th of September
NOx amendment EMA to Parliament mid September – decision process expected to be complete by mid January 2005
1st October: 250 permit requests submitted to NEa
1st January 2005: 250+permits to allow full start CO2
1st May: 300 permits to start NOx emissions trading

16. Legislative Structure
Environmental Management Act (EMA)
Chapter 8
IPPC Permit
Chapter 16
Emissions Trading Permit
Emission Authority
General Ordinance
on emissions trading
(general requirements)
Decree on Emissions Monitoring
for NOx & CO2
Registries for NOx and CO2

17. ET - IPPC - BAT
Emissions Trading driving force of emissions reductions >>> IPPC permit is following
Chapter 8- IPPC parallel to Chapter 16 Emissions trading
IPPC Competent Authority supporting and cooperating with Emissions Authority >> clear separation of responsibilities
NOx emissions trading to function within EU-legislative framework
ELV’s in EU legislation (LCP, WI) as minimum levels
Inspection: mg/Nm3 per installation/process: IPPC
Annual load of the facility: Emissions Authority

18. Major considerations
Local Aspects: studied in 2002 report by TNO>> industrial installations only in limited number of situations contributing to hot spots - local air quality
Technical approach: Emissions Trading direct and effective driver towards decisions in the companies on application of Best Available Techniques
Importance of Monitoring and Environmental Management Systems so far under valuated and insufficiently implemented through IPPC permit
Inspection - Enforcement requires effective organisation

19. Netherlands’ Emission Authority
Competent Authority for permitting, validation, inspection and enforcement and management of registry
Main consideration during development:
In a trading environment all activities of all parties, i.e. NEa, industry and verifiers, must be based on uniform standards and requirements laid down in protocols to safeguard public and private domains and define proper responsibility structure

20. Main Elements & Structure
Ministerial Decree: Monitoring Requirements
EU Monitoring guidelines for CO2 - National guidelines for NOx
Monitoring Protocol:
Company drafts monitoring protocol outlining compliance with the law
Validation Protocol:
Emission Authority approves monitoring methodology/protocol on a strict uniform basis laid down in validation protocol
Verification Protocol:
External verifiers “verify” annual emission report on basis of procedures and requirements laid down in verification protocol
Inspection & Enforcement Protocol:
Procedures and requirements for NEa inspectors

21. Planning Process By 1 October: 250 monitoring protocols received
Large scale “validation process” involving Permitting Agency and 3 Technical Consultancy Firms
250 monitoring protocols validated by mid November on basis of strict criteria and procedures
Target: all 250 companies to receive CO2 permit before January 1rst start of ET
By mid February: NOx permit to all companies aimed at start of NOx trading in May 2005
All documents translated and put on website

22. Compliance & enforcement strategy
Sanction severity
Sanction
dimensions
Sanction probability
Detection probability
Control
dimensions
Control probability
Loyalty and obedience
Level of acceptance
“Autonomous-Automatic” compliance dimensions
Knowledge of rules

23. Lessons we learned Involvement of national industry
through comprehensive dialogue
large number of experiments monitoring, validation, verification etc.
Large scale demonstration project from May –October in which 27 companies participate
Seeking international cooperation and support
Involving cooperation with Commission and other interested MS and international industry
Reasoning behind ENAP project: promoting dialogue between MS in development of new instruments

24. Lessons we propose for CO2:
Full cooperation by industry from the very start
geared to “learning by doing”
Strict monitoring in ET offers range of new, positive challenges also for CAFE

25. Recommendations for CO2
Strict enforcement essential for success of ET
Aim at autonomous compliance through:
clarity in monitoring structure & requirements
concentration on high level of acceptance
communicate your inspection and enforcement strategy
at EU level:
Information exchange on inspection & enforcement strategies, monitoring, data management >>> best practices
Strengthen basis and structure of IMPEL-INECE
Design a common inspection protocol at European level
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