London — The carbon floor price the new Dutch coalition government plans to introduce from 2020 will be set at Eur18/mt of CO2 emitted in the power sector, a Dutch lawmaker told S&P Global Platts Tuesday.
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"The Netherlands is introducing a CO2 floor price in the electricity sector. As from 2020, the price per [metric] ton of CO2 emitted in that sector will be Eur18. This figure will rise to Eur43/mt in 2030," Stientje van Veldhoven, an lawmaker from the liberal D66 party which is part of Prime Minister Mark Rutte's third coalition, said in an email.
"This includes the ETS price, so the extra levy that companies will have to pay will depend on the development of the ETS price," the lawmaker added.
EUA carbon allowances are currently trading above Eur7/mt, but could rise amid a planned reform of the EU's Emission Trading Scheme from 2020.
The so-called Rutte III coalition, a four-party coalition which took over 200 days to negotiate after the elections in March, last week reached a coalition agreement, which only specified the CO2 minimum price to gradually rise to Eur43/mt by 2030.
The Dutch Cal-20 baseload power contract has already surged over 10% or almost Eur4/MWh since the news broke last Tuesday with the contract heard trading at Eur38.10/MWh Monday, according to trading sources. To balance the higher costs from such a CO2 tax for energy consumers, the coalition agreement proposes a cut in energy taxes on gas and electricity. Van Veldhoven also confirmed plans to close all Dutch coal-fired power plants including three new-build units with a combined capacity of over 4 GW that only came online over the last couple of years.
The introduction of a carbon floor price will lift generation costs for the five remaining Dutch coal plants more than for gas-fired plants due to their higher carbon intensity, leading to increased coal-to-gas switching in the Dutch market.
Higher Dutch prices would also have an impact on cross-border flows if the measures are matched by Germany or Belgium.
Dutch cross-border flows are equal to a quarter of national power demand, the latest TSO data shows, with over 24 TWh a year flowing across borders.
On the German border, where transmission capacity will be boosted by a fourth interconnector next year, some structural changes have started to appear with flows out of Germany down by third last year compared with the previous three-year average, while flows from the Netherlands into Germany are up sharply especially at times of very low wind in Germany.
However, higher Dutch power prices could extend the economic viability of Germany's oldest coal plants -- pending coal and carbon measures in Germany itself.
Flows on the BritNed cable to the UK will depend on the UK's post-Brexit carbon policy in 2020 with the UK already having introduced a carbon floor price currently in addition to EUAs, which has seen most older coal plants close last winter.
COAL PLANT PRESSURE
In the Netherlands', the pressure on coal plants to close before the planned 2030 deadline will be strongest on the two remaining older units (RWE's 600-MW Amer 9 and Vattenfall's 650-MW Hemweg 8) after a previous "coal tax" linked to plant efficiencies has already caused most Dutch coal units close over recent years.
Vattenfall, has already offered to close Hemweg 8 before the end of its life-span if compensated, while plans to end biomass co-firing subsidies in 2024 and the gradually rising new CO2 floor price will add pressure on RWE's Amer 9 plant.
Coal's share in the Dutch power mix dropped 2016 to 32%, while gas plants increased their share to 46%, with the Netherlands still heavily depending on fossil-fuels for their electricity with overall carbon emissions just down 11% from 1990, according to the Dutch statistics office CBS.
Net emissions from Dutch power stations, however, were down in 2016, the CBS said.
Following a court ruling, the Dutch government must reduce greenhouse gas emissions by 25% compared to 1990 levels by 2020 with the new coalition agreement for Rutte III aiming for a 49% cut by 2030 but with no specific targets for 2020 as yet.