issue 3.0, New Values Newsletter

To read the English version of the New Values Newsletter follow the link below.

In this issue:

1. Calculation formulas defined8. Glossary
2. Emissions trading another step closer
3. Green certificate becomes Certificate of Origin
4. Report on congress for NOx and CO2 emissions trading
5. Cake!
6. Amendment to NOx Performance Standard Rate
7. Diary
8. Glossary

1. Calculation formulas defined

The calculation rules for allocation of CO2 emission rights have been announced.
The announcement was made at the congress for NOx and CO2 emissions trading, held in the Rotterdam WTC on 29 January and organized by the Netherlands Agency for Energy and the Environment. Representatives of the Ministry of Housing, Spatial Planning & Environment and of the Ministry of Economic Affairs described the basic principles for calculating emission rights and presented a number of calculation models.

The calculation rules have been drawn up in broad consultation with industry, electricity generation organizations and government. The formulas aim to create the fairest possible distribution of the available CO2 emission rights between the entitled parties. One of the basic principles is that a company belonging to the global leaders be treated accordingly. Therefore the formulas take into account ‘early action’ regarding energy efficiency improvements and reduction of CO2 emission.

The basic rule for calculating emission rights is as follows:

Allocation = historical emission x production growth x energy efficiency x allocation factor

Whereby:
Historical emission = average emission of CO2 in the years 2001 and 2002
Production growth = production growth during 2003, 2004, 2005 and 2006
Energy efficiency = as established in the framework of the Covenant Benchmarking or a Multi-Year Agreement. Companies not participating in these schemes are subject to specific values
Allocation factor = factor for ensuring that the sum of the individual emissions falls within the total available volume

2. Emissions trading another step closer

As we mentioned in the previous newsletter, the preparations for the European directive on emissions trading, due to start on 1 January 2005, are in full swing. In the meantime the Dutch government and the industrial and energy sectors have reached agreement on the CO2 emissions ceiling. The sectors are to be allocated 115 million tons of CO2 annually for the first trading period of 2005 - 2007. In mid-February this will be supplemented by a national allocation plan which will allocate emission rights to each industrial installation.

The 115 million tons of total emissions is 6 million tons more than the target level that the Ministry of Economic Affairs had itself set. With the assignment of a higher level, Minister Brinkhorst is acknowledging the objections of the employers’ organizations. However, after 2007 the ceiling must slowly be reduced to 112 million tons in 2010, exactly the level of the reference estimate issued by ECN and RIVM. In this way the contributions of the industrial sector to the Kyoto targets can be ensured.

Based on the reference estimate, the government has also determined the target levels for CO2 emissions in the other sectors. These total 186 million tons of CO2 in 2010. The target values for all sectors in million tons are represented below in tabular form:

Reference estimate update Reference estimate 2002

Target values for sectors 2000 2005 2010 2010

Agriculture and market gardening 8.1 7.7 6.5 8.3
Transport 35.2 36.8 38.3 36.4
Built-up areas 31.7 30.1 29.0 30.5
Industry/Energy 101.2 109.0 112.2 115.3
Total 176.1 183.6 186.0 190.5

The compromise between the government and the business community on the total emissions ceiling for CO2 provides space for a growing emission by the participants. The Netherlands is thus one of the few countries in the EU able to provide this leeway.

3. Green certificate becomes Certificate of Origin

On 1 January 2004 the system of Certificates of Origin for renewable electricity came into effect. This replaces the system of green certificates.
It is only with the Certificates of Origin that the delivery of renewable energy can be proved and the reduced rate of the Regulatory Energy Tax (RET) can be applied. The Minister of Economic Affairs has designated TenneT as certificate administration body for a period of 10 years.

The adjustment would seem to be above all a question of name. The only important change involved is that a purchased Certificate of Origin must be supplied within three months of the corresponding electricity being produced. The changes thus have no significant consequences for the New Values platform CertiChange, which facilitates the trade in the certificates. Time will show whether the same applies to the market.

4. Report on congress for NOx and CO2 emissions trading

On Thursday 29 January 2004 the NOx and CO2 emissions trading congress took place in the Rotterdam WTC. New Values took part – and how! We had our own striking stand that drew the attention of many visitors. Not lastly because there were things to win. Everyone who left their business card with us had a chance of winning a tasty cake (for the result see the next article).

This humorous idea served a higher purpose, of course. We wanted to collect as many names and addresses as possible of organizations with current or future involvement in emission rights trading. This is because New Values is developing a Centre of Expertise which compiles all information about trading in emission rights and Certificates of Origin.

We want to involve as many interested parties as possible in this Centre of Expertise, so that they can then share knowledge with each other. After all, trading in emission rights is increasingly becoming a fact, as became clear at the congress. Information was in strong demand – and New Values aims to meet this need with its Centre of Expertise, by informing those involved and by bringing them into contact with each other.

The Centre of Expertise is supported by such organizations as TNO, KEMA and Ecofys. It is expected to become operational in the first quarter of 2004.

5. Cake!

In view of the high response to the business card promotion we have decided to present three cakes. The following winners came out of the hat:

- General Electrics Plastics
- Heineken Nederland Supply
- Philips Lighting B.V.

New Values has already contacted the persons in question to arrange delivery of the cake.

6. Amendment to NOx Performance Standard Rate

The Performance Standard Rate (PSR) for NOx has been amended. The latest figures were presented at the congress of NOx and CO2 emissions trading on 29 January this year. The PSR indicates the maximum amounts of NOx that companies and industries are permitted to emit. When determining the rate, a distinction is drawn between companies with combustion installations (minimally 20 megawatt of thermal capacity) and companies with process installations. The changes mostly relate to companies with combustion installations and are necessary because heavy industry will use more energy in 2010, and thus emit more NOx, than previously assumed.

An overview of the amendments to the PSR is given below
The PSR for companies with combustion installations is expressed in grams NOx emission per gigajoule (GJ) of energy used.

Former New
2005 61 g/GJ 2005 68 g/GJ
2006 59 g/GJ 2006 63 g/GJ
2007 57 g/GJ 2007 58 g/GJ
2008 55 g/GJ 2008 52 g/GJ
2009 52 g/GJ 2009 46 g/GJ
2010 50 g/GJ 2010 40 g/GJ

The new agreements mean that the planned evaluation of energy use by heavy industry in 2006 will not take place. Due to the amendment, the PSR will now not be changed until 2010.

One clearly sees that the rate allows more leeway until 2007, after which it drops more sharply. This change allows industry to become accustomed to trading more gradually, but also shows that it must take emissions trading very seriously. In four years’ time a lower supply (fewer credits due to more stringent rates) will be created, but at the same time a higher demand (more credits needed to cover surpluses). During the adjustment period there will be a high information requirement, regarding both the market and the field of legislation. New Values is responding to this need with its extensive Centre of Expertise, due to start operation in the first quarter of 2004.

Those companies that invest in NOx emission reduction installations from the start (around 2005) will thus now be given the time for these investments to pay off. These years lie between the investment decision and the moment that a reduced emission is realized. During these years there will be less need to ‘buy in extras’, but in the following years the ‘reward’ will be greater due to the rising demand. The companies that make timely investments in NOx installations will thus, from 2007 onwards, be suppliers that may be able to negotiate a higher price.

Practice will show to what extent the newly set PSR is achievable and where shortages and surpluses will arise. It seems clear that in the future emissions trading will be an indispensable instrument.

7. Diary

New Values regularly organizes CertiChange and EEeXchange workshops. Later this year these will be joined by workshops for the CO2 platform, now currently under development. All practical and legal aspects of trading in Certificates of Origin and/or emission rights are dealt with at these events. You can also carry out pilot trading through the platform in question, so you can experience for yourself how simply it works!

The New Values workshops are free of charge and take place in Media Plaza Utrecht from 9.30 am to 12.30 am.

Would you like more information, or to register? Then contact Monique Broekhoff,
tel. 020 - 305 40 73 or monique.broekhoff@newvalues.net.
Please don’t forget to state your name and company details in the mail.

CertiChange

Thursday 4 March 2004
Thursday 1 April 2004
Thursday 6 May 2004
Thursday 3 June 2004
Thursday 1 July 2004
Thursday 5 August 2004
Thursday 2 September 2004
Thursday 7 October 2004
Thursday 4 November 2004
Thursday 2 December 2004

EEeXchange

Tuesday 2 March 2004
Tuesday 1 June 2004
Tuesday 7 September 2004
Tuesday 5 October 2004
Tuesday 2 November 2004
Tuesday 7 December 2004

CO2 trading (name of platform to be announced)

Wednesday 7 July 2004
Wednesday 4 August 2004
Wednesday 8 September 2004
Wednesday 6 October 2004
Wednesday 3 November 2004
Wednesday 1 December 2004

8. Glossary

If you are going to participate in the emissions trading system, you will always need to deal with the Netherlands Emissions Authority (NEA).

The NEA is currently still in the process of creation. As soon as everything is complete it will be an independent managing body, supervising the trade in emission rights and ensuring compliance with the relevant legislation. Companies can apply to the authority for the required emissions trading permit. In addition, the NEA registers the transfer of emission rights.

Companies can already contact the NEA for a verdict on the way in which the emissions will be measured. An approved monitoring protocol forms the basis for an emissions trading permit. Trading is not possible without this permit.