Although the most important element –is still unknown, namely the rate, the draft provides a clear picture of the intended system and its execution. It will become a lot more complex and less attractive for industrial parties to operate in the Netherlands now that a new tax (in the middle of an economic crisis/recession) will be introduced.

Carbon tax system

The carbon tax was presented in June 2019 by the government as part of the Dutch ‘climate agreement’ which includes the vision for industry to emit virtually no more greenhouse gases by 2050. Later that year the European Commission introduced its Green Deal with the same (zero emission) vision for 2050. The Dutch government does not want to wait for the Green Deal to be implemented, and has thus drawn up its own (national) plan (the income from this levy will therefore end up in the state coffers and not in Brussels). As of 1 January 2021 this carbon tax will be effectuated (possibly in the midst of a recession).

The system of the carbon tax is somewhat aligned with the European emissions trading system. The EU-ETS requires the surrender of allowances for emitted greenhouse gases. These allowances can be bought or obtained and the total number is reduced each year (to reduce emissions). Following this EU-ETS, a market price for carbon dioxide emissions is created.
The carbon tax is related to this market price. The Dutch government intends to introduce a statutory carbon rate (of which the amount is still unknown). The carbon tax will be the difference between the statutory carbon rate and the (fluctuating) EU-ETS market price. In other words:

Carbon tax = statutory carbon rate - EU-ETS market price

This means that the lower the EU-ETS market price is, the higher the carbon tax will be. With a recession possibly around the corner, the EU-ETS market price will likely decrease.

Complex and inefficient

Operators of greenhouse gas installations are being confronted with a new system in addition to the already complex EU-ETS. Although the government intended to closely follow this system, it follows from the draft that it did not succeed in doing so. The carbon tax system has a different allocation date for ‘free rights’ and includes new reporting obligations (such as an industrial emissions report, an industrial monitoring methodology plan and a new register). There is however a familiar element found in the competent authority which will be the Dutch emissions authority (NEa). The NEa will enforce the system and levy the taxes (and will therefore be both tax collector as well as the enforcement authority). It is to be seen whether this relatively small and specialised authority is up for yet another complex task (next to the supervision of the EU-ETS and the renewable energy system.

It remains unclear why the Dutch government did not join the EU stream for this shared objective but instead decided to adopt a national regime. By introducing the Dutch carbon tax, there will be another national divergence in the EU market, making it more complex for operators. Although it might increase revenue for the Dutch state, it increases the risk of industrial sites moving to other EU-states which have no or a lower rate. On top of that, introducing a tax in the midst of a possible recession might not be the most business friendly move.

Enough reason to officially respond to the draft. This can be done until 29 May 2020 through the online consultation.

The precise system is too complex to cover in this one article, but if you want to know more about this draft or discuss about this topic, you can always reach out to your Loyens & Loeff contact person or to Victor van Ahee.