An EU ETS-balancing Dutch carbon levy would need to be set at €130/tonne of CO2 to wipe out coal-fired power production in the country, according to two studies by consultancy Ecofys.

Under the studies commissioned by Dutch utility Eneco, Ecofys modelled the effects of an additional CO2 levy for the Netherlands’ power sector where any revenue generated would be used to buy EUAs and cancel them.

This would help prevent the so-called ‘waterbed effect’, where emissions cuts due to additional measures can result in additional emissions elsewhere in Europe.

Using 2014 energy and CO2 prices, one study found that a €45/t CO2 levy on top of the EU ETS price for emissions above a threshold of 450gCO2/kWh would be needed to incentivise any fuel switching from coal to cleaner gas, while €130/t would be needed to get the marginal cost for all coal plants above all gas plants.

Details about the studies are available here and here.

FACTFILE

• The Dutch government is under pressure to take steps to phase out coal power following a Nov. 2015 motion passed by lawmakers in the lower national parliament.
• The Liberal Party, the country’s senior coalition partners, voted against an aggressive phase-out, saying more efficient Dutch plants would merely be replaced with dirtier imported coal-based power.
• The Dutch government is appealing a landmark 2015 court ruling in favour of environmentalists and citizens seeking deeper 2020 emission goals, but it has also pledged to introduce additional CO2-cutting measures.
• With EUA prices below €6, industry groups have flagged increasing concerns about the risk of overlapping national policies.

By Ben Garside – ben@carbon-pulse.com