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29 June 2020 / article

The Netherlands tighten rules on ETS-trading

The Netherlands has been a popular market for (international) companies trading in ETS-rights. Because of the risk of fraud related thereto, the national administrator will request as of 1 January 2021 a registration with the Dutch Chamber of Commerce for trading account-holders.

EU-ETS

In the EU for every tonne of carbon emission an emitter must submit a so-called emission right. Through this system, the EU Emissions Trading System (or EU ETS), the emission of carbon dioxide comes with a price tag, so companies have an incentive to decrease their emissions.

Emission rights are tradeable, and a substantial market has developed in the trading of emission rights. As the value of an emission right fluctuates (sometimes quite heavily), these rights are subject to speculation and hedging. The EU ETS market is therefore not just populated by emitters, but more and more by (international) traders and financial institutions.

With increasing volumes, the risk of fraud increases as well. Over the past years several cases of EU ETS-fraud occurred, with billions of damages. Also in the Netherlands fraud occurred, from so-called carrousel fraud with VAT to outright digital theft of rights from the national registry.

Fraud protection

In order to prevent fraud, the Minister of Economic Affairs introduces a new requirement for traders in emission rights. As of 1 January 2021, every holder of a trading account in the Netherlands must be registered with the Dutch Chamber of Commerce.
So far foreign companies could open an account in the Dutch registry without such requirement (only an EU-bank account was obliged). Although the NEa (the Dutch administrator) was already very strict in opening accounts by foreign companies, these will become even more scrutinized.

Register before 1 January 2021

It appears from the explanatory note that the Brexit and increasing volumes of trade in emission rights justifies the registration obligation. It is however not substantiated why this registration would prevent fraud.
Nevertheless, the requirement is adopted by the Minister and effective as of 1 January 2021. In order to prevent current trading accounts to be frozen and closed, or pending trading account applications to be denied, it would be best to timely apply for a registration with the Chamber of Commerce (or move your trading account to another administrator).

If you want to cut through the red tape, English registration forms can be found here.



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