Netherlands

NL-1b:Benchmarking  Covenant on Energy Efficiency

Policy Description

Under the Benchmarking Covenant, signatory companies offer to be (or become) among the best in the world in terms of energy efficiency. The goal is for large energy consumers (energy consumption of at least 0.5 PJ per year) (see Target Group) to be ranked "among the 10% world best" in terms of energy efficiency in 2012. 

Description

Under the Benchmarking Covenant, signatory companies offer to be (or become) among the best in the world in terms of energy efficiency. The goal is for large energy consumers (energy consumption of at least 0.5 PJ per year) (see Target Group) to be ranked "among the 10% world best" in terms of energy efficiency in 2012 [1].

The Covenant requires member companies to develop and follow energy efficiency plans  (EEPs) to systematically improve their energy efficiency and to monitor their energy use more scrupulously. In return, the government agrees not to impose additional specific national measures aimed at energy conservation or CO2 emission reductions on the participating companies. In addition, companies acting under the covenants are largely exempt from the generic (economy-wide) energy/carbon tax and are automatically granted compliance with the energy-related provisions of their permits under the Environmental Management Act.

 

Smaller energy users (energy consumption < 0.5 PJ/yr) are covered by the Long Term Agreements (LTAs) (see Policy NL-2). 

 

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Administrative, Negotiated Agreement

Position in the Pyramid

About Us

Participation: Voluntary

Period

Start Date: 2000

End Date: 2012

Policy Linkages

Replaced By Long-term Agreement on Energy Efficiency for EU ETS enterprises (LEE) Effort Defining

Agencies Responsible

Ministry of Economic Affairs
Benchmarking Committee
AgentschapNL

Primary Objective: Energy

Objective

Achieving a level of energy efficiency equal to the top 10% of the world, based on the philosophy that no more can be asked from Dutch industry than that.

Target Group

Large industrial enterprises (All the companies with an energy consumption of at least 0.5 PJ per year)

Driver of energy consumption or emissions affected by policy: Relative energy efficiency (compared to competitors worldwide)

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

94% of total industrial energy consumption and 100% of electricity sector energy consumption in the Netherlands [3]

Quantitative Target? yes

Target: To be among the top 10% of the most energy-efficient (comparable) facilities world-wide in 2012

Progress Monitored? yes

Verification Required? yes

Enforced? yes

Sanctions: Tighten the terms of the Company’s current environmental licence in a unilateral action , or to deploy other policy instruments to address energy use or emissions (e.g. remove exemption from generic energy tax).

Requirements on the Target Group

  • Carry out an energy efficiency plan (see NL country factsheet)
  • If a company cannot reach the Top of the world with 'cost-effective measures' (i.e. with an Internal Rate of Return IRR of less than 15% after tax) and 'less cost-effective measures' (the average cost of capital in the sector according to the Protocol outlined in the Energy Efficiency Plans) (*5) within 8 years time, it shall take measures to realise this level as soon as possible, and in any event in the year 2012, or realise a comparable energy efficiency result by other acceptable means. These can include pooling the results with that of other facilities of the same company or those of other companies (and jointly meeting the overall target), or the application of flexible tools such as Joint Implementation (JI), the Clean Development Mechanism (CDM) and emission trading.

Support by Government

In return for participating companies achieving the leading global performance in energy efficiency, the Dutch government agrees to make a reciprocal effort, ensuring that (*1):

  • No supplementary national policy governing CO2 reduction or energy conservation is imposed on these companies;
  • No specific national energy tax ( i.e. specifically targeting the target group, in contrast to generic taxes or EU-imposed taxes) will be levied on these companies (in contrast to generic energy taxes which the government can still implement according to the negotiated agreement). Currently however, agreement participants are largely exempted from the generic energy/carbon tax because of their participation in the negotiated agreements.
  • The costs of buying carbon credits arising  from the national obligations of the Dutch government in the field of the Joint Implementation, the CDM or international emissions trading (to meet its Kyoto target) will not be charged directly to the participating companies.

Implementation Toolbox

The following tools are provided to support implementation of this policy:

  • Monitoring Protocols
  • Benchmarking manuals
  • Guidelines for Energy Efficiency Plans

These documents are published on the website of "Commissie Benchmarking": http://www.benchmarking-energie.nl/index.php3 (see 'Wereldtop' - Top of the world - for benchmarking guidance; 'Energie-efficiency plan' for the EEP guidelines; and 'Voortgang' - progress - for guidance on monitoring). Annexes of the agreement (also found on the same website) contain further requirements and guidance.

Complexity of Implementation

Government

Government agency must assess credibility of methodology and assessment of the efficiency of the Top-of-the-world

Target Group

Companies must develop methodology for establishing Top-of-the-world and establish the efficiency level of the world top (10%) every 5 years (*4).

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions 95PJ of energy savings and ~ 5.8 million tonnes of CO2 emission reduction in the period 2000-2012 Not available
Estimated costs/benefits for industry Not available Not available but each company or group of companies must hire a consultant to establish the international benchmark.
Estimated cost for government Not available Not available
Other Benefits
General Benefits Industry increases its energy efficiency and reduces its CO2 emissions, which provides benefits for the environment and economy, improving competitiveness
Specific Benefits The covenants enables companies to investigate energy efficiency options in a structured way due to the Energy Efficiency Plan. It contributes to awareness, shared commitment of all parties and exchange of information, thereby making optimal use of the knowledge of other companies because of the sectorial organisation [4]. Allows industry sector to grow because it is based on a performance-based energy efficiency measures instead of an absolute emission cap. Provides better insight into a companies energy efficiency (and competitiveness) relative to its peers and remaining improvement potentials.

References & Footnotes

References

[1] Commissie Benchmarking (1999). Energy Efficiency Benchmarking Covenant. http://www.benchmarking-energie.nl/pdf_files%5Ccovteng.pdf

[2] WEC (2004). Energy Efficiency: A Worldwide Review Indicators, Policies, Evaluation, http://www.worldenergy.org/documents/eepi04.pdf

[3] Commissie Benchmarking (2002). Benchmarking Covenant: High Degree of Industrial Participation Interim Report as of February 2002. Commissie Benchmarking, Utrecht http://www.benchmarking-energie.nl/pdf_files/Benchmarking%20Covenant%20uka.doc

[4] ECN (2009). Energy Efficiency Policies and Measures in The Netherlands http://www.odyssee-indicators.org/publications/PDF/netherlands_nr.pdf

[5] CE - Committed to the Environment Delft (2010). Convenant Benchmarking Energie-efficiency: resultaten en vrijstellingen energiebelasting: http://www.ce.nl/publicatie/convenant_benchmarking_energie-efficiency%3A_resultaten_en_vrijstellingen_energiebelasting/1069

Footnotes

(*1) Involves the Ministers of Economic Affairs and of Housing, Spatial Planning and the Environment

(*2) Contract between participant and VBE

(*3) the national energy agency has undergone various mergers and name changes in the last decade, from Novem (the Dutch agency for Energy and Environment), to SenterNovem to currently AgenctschapNL (AgencyNL), see: http://www.agentschapnl.nl/

(*4) Article 4; Clause 1: For technical reasons, every company is required to hire a consultant to determine the best international standard. In practice, Companies will issue joint instructions to a consultant, complying with existing benchmarking systems as far as possible. Sectoral organisations may not or cannot act for their members, but will play a co-ordinating and supporting role in this. [1]

(*5) If the gap with the best international standard can be bridged through cost-effective measures, these measures shall be taken as soon as possible, and in any event by 31 December 2005. ‘Cost-effective measures’ are deemed to be all measures with an internal rate of return of 15% after tax. If the available cost-effective measures are not sufficient to bridge the gap with the best international standard, less cost-effective measures must be taken as soon as possible, and no later than in the year 2008, in order to realise the best international standard. ‘Less cost-effective measures’ are deemed to be measures that do not meet the minimum profitability requirements of the Company facility in question, but which do meet the expected average cost rate for borrowed capital in the sector. This will be determined by a simple method included in the Protocol on energy efficiency plans.

(*6) in terms of targets, the participants in the Benchmarking agreement will be covered by the EU ETS rules and procedures for Phase III. However, in 2009 it was decided that the participants in the Benchmarking agreement will keep on preparing and implementing energy efficiency plans. SenterNovem will review the plans and support monitoring its progress: http://www.benchmarking-energie.nl/pdf_files/Persbericht%20MJA-ETS%202%20okt.pdf

Other Useful Resources

Energy Management Programme in the Netherlands

Information sheet prepared by Ronald Vermeeren as part of the IEA-IIP Policy Pathway Workshop on Energy Management Programmes (September, 2011).