Dutch implementation of the Renewable Energy Directive for biofuels

31/05/2011

The Act implementing the biofuels provisions of the Renewable Energy Directive (2009/28/EC) ("RED") in the Netherlands (the "Act") was published in March this year and entered into force with retroactive effect as of 1 January 2011. This Act still required further substantiation in secondary legislation. To such effect, on 3 and 11 May respectively, the Minister of Infrastructure and Environment published of the Decree on renewable energy for transport (Besluit hernieuwbare energie vervoer) (the "Decree") and the Regulation on renewable energy for transport (Regeling hernieuwbare energie vervoer) (the "Regulation"). See the Bulletin of Acts and Decrees 2011, no 197 and the Government Gazette 2011-8235. This newsflash gives a brief overview of the main provisions of the legislation implementing the RED.

In force as of 1 January 2011

The deadline for implementation of the RED was 5 December 2010. Therefore most provisions of the Act, the Decree and the Regulation, have entered into force with retroactive effect as of 1 January 2011. Consequently, the 2007 Biofuels Road Transport Decree (Besluit biobrandstoffen wegverkeer 2007) has been repealed and its accompanying regulations have lapsed, e.g. the Biofuels Road Transport Administration Regulations (Regeling administratie biobrandstoffen wegverkeer) and the Regulation on Double Counting of Better Biofuels (Regeling dubbeltelling betere brandstoffen).

Obligated registered parties and biofuel targets

According to the RED in 2020 10% of all energy used in transport must be derived from renewable sources. Such promotion of renewable energy in transport must contribute to the reduction of greenhouse gas emissions and to the decrease of the dependency on oil import. The Decree now provides for an annual target of 4.25% in the Netherlands for 2011. For the following years this percentage will slightly increase to 4.5% in 2012, 5% in 2013 and 5.5% in 2014. This means that for 2011, 4.24% of the total sales (i.e. the total release) of petrol, diesel and biofuels brought onto the Dutch market, should consist of biofuels. Within this generic target, both the sales for petrol and diesel should separately consist of at least 3.5% of biofuels. Ultimately in 2014 the targets to reach the 10%-target in 2020 (or more) will be discussed, taking into account new EU regulatory and biofuel market developments, including the developments for the incorporation of Indirect Land Use Change (ILUC) in the sustainability criteria.

Not only biofuels (including biogas) for road transport are eligible, but also electricity and hydrogen used for transport (but excluding electricity for rail transport) and biofuels used in mobile machines such as inland ships. Untaxed red diesel for inland shipping remains excluded. For the first years the Ministry of Infrastructure and Environment expects that the targets will mainly be reached with biofuels. In the long run, also electricity and hydrogen may contribute.

As in the past, the Netherlands promotes the use of biofuels by imposing a supply obligation on permit holders of an excise warehouse (accijnsgoederenplaats) to release (uitslaan) a certain percentage of biofuels per year of their total fuel release. Under the new Decree the annual target applies to so-called obligated registered parties (registratieplichtigen), which includes all permit holders of an excise warehouse and registered consignees (geregistreerde geadresseerden) that store or release petrol, diesel and biofuels for consumption. In addition producers of biogas and electricity for transport may opt-in voluntary to benefit from the trade in biotickets.

Register of the NEA based on a biofuels balance system

To monitor the flow of biofuels and to administrate the share of energy from renewable sources in transport, the Decree provides for the establishment of an automated central register managed by the Netherlands Emission Authority (NEA). Each obligated registered party (and each voluntary registered party) must open an account in the register to administrate its biofuels transactions including the characteristics of those biofuels. In addition, the register administrates the resale of biofuels, the trade in biotickets and other forms of renewable energy for transport such as electricity. The NEA registration system is still under development and is not expected to be fully automated before 2013.

Obligated registered parties must submit a biofuels balance (biobrandstoffenbalans) to the NEA each half year. The biofuels balance must include the sustainability information, e.g. quantities at the start and the end of the relevant period, type of biofuel, sustainability system applied, greenhouse gas reduction achieved and land of origin. The party that first receives a consignment of biofuels in the Netherlands must attach the relevant sustainability information and pass this on to the chain of custody. The biofuels balance is based on a mass balance system, which allows consignments of biofuels with different sustainability characteristics to be mixed. The NEA verifies the submitted data and especially checks whether the sustainability of the biofuels is sufficiently proved.

The first deadline for submitting a biofuels balance is 1 September 2011. If a biofuels balance is submitted, automatically an account at the NEA will be opened. Since the registration system is still under development, for the time being, the spreadsheets published on the website of the NEA must be used.

Compliance with sustainability criteria and required declarations

The Decree provides that renewable energy may only count towards the realisation of the targets if the sustainability criteria as set out in the RED are met.

Verification declaration
The compliance with sustainability criteria can be proven with an audit by an accredited auditor on the basis of a sustainability scheme (or certification scheme). Obligated registered parties must provide a verification declaration to such effect in accordance with the model provided in the Regulation. The applied sustainability scheme must be accepted by the European Commission or by the relevant Dutch minister based on a Dutch verification protocol. For 2011 the NEA will temporarily allow all sustainability schemes that have been submitted to the European Commission and are awaiting the European Commission's acceptance in accordance with the RED.

All biofuels brought onto the Dutch market in 2011 must already comply with the sustainability criteria insofar such biofuels are used to count towards the target. However, the obligation to supply a verification declaration to such effect only applies to biofuels produced after 1 July 2011 or to entries (ingeslagen) after 1 July 2011. The reason behind this is the lack of accepted certification systems for the beginning of 2011. The Ministry of Infrastructure and Environment therefore seems to accept that for the period until 1 July 2011 no proof of compliance to the sustainability criteria is possible.

Sustainability declaration
Any transfer of consignments of biofuels to either another obligated registered party or abroad must be accompanied with a sustainability declaration. Such document contains information in relation to the sustainability criteria of the biofuels and is required to accompany any physical transaction of biofuels after its first entry in the Netherlands. The Regulation provides a model.

Double counting declaration
The calculation of the targets is not based on the volumes of biofuels that are brought onto the market, but on the energy content (the caloric value) of such biofuels. The energy content of biofuels from wastes, residues, non-food cellulosic material and lingo-cellulosic material, the so-called second-generation biofuels, may be counted double to achieve the mandatory target. For this purpose, in addition to the biofuels balance, a double counting declaration in accordance with the model provided by the Regulation has to be submitted with the first entry of such biofuel, together with a declaration based on the Dutch Verification protocol on double counting of biofuels (published on the website of the NEA). For the Netherlands double counting is not new. Previously double counting was already provided for in the Regulations on Double Counting of Better Biofuels. In addition to abovementioned second-generation biofuels the Decree also aims to provide a special incentive for the use of electricity for transport. Pursuant to the Decree electricity for transport may be counted 2.5 times.

Biotickets

Obligated registered parties may also meet their target through purchasing biotickets. Comparable to the guarantees of origin for renewable energy, biotickets are in fact contracts between market parties regarding the purchase and sale of biofuel rights, and are not attached to the physical biofuel consignments. The Regulation provides models for biotickets in relation to biofuels and electricity. As said, suppliers of biogas or renewable electricity for transport may voluntary open an account at the NEA-register to profit from the sale of biotickets. Any excess of the target may be sold as biotickets to obligated registered parties. Please note however that targets will equally apply to voluntary registered parties as to obligated registered parties.

Sanctioning

Non-compliance with the obligations set forth in the Act, Decree and Regulation may constitute a criminal offence. Furthermore administrative measurements such as administrative penalties (bestuurlijke boete) or orders for periodical penalty payments (dwangsom) may be imposed. In addition, target obligations must be compensated the following year.

Secondary legislation Fuel Quality Directive and Clean Vehicles Directive

Not part of this newsflash but also recently published are the decree and regulation further implementing the Fuel Quality Directive (2009/30/EC), published on 27 and 29 April respectively (see the Bulletin of Acts and Decrees 2011, 192 and the Government Gazette 2011-7532). Also, a draft regulation further substantiating the implementation of the Clean Vehicles Directive (2009/33/EC) was published on 6 April 2011 (Attachment to Parliamentary documents, 32 357 no 28).

Conclusion

With the recent Act, Decree and Regulation, the Netherlands has implemented the provisions of the RED in relation to biofuels insofar possible. Several issues are, however, still unclear. On a European level, the Commission still has to provide - based on provisions of the RED - amongst others, regulations regarding the reporting by the Member States. In addition, the Commission still has to provide information on accepted certification systems. On a national level, the Decree only sets targets until 2014. To reach a 10% target in 2020 the annual targets for the years after 2014 will need to increase strongly. In addition, rules for the accreditation of auditors have not yet been laid down and the register of the NEA is not yet automated, therefore currently temporary measures as described in the Regulation apply.

We hope that you find this overview a helpful guide to the rapidly changing regulatory framework for biofuels. If you have any questions or remarks regarding this newsflash please do not hesitate to contact us.

Authors

Picture of Cecilia Weijden
Cecilia van der Weijden
Partner
Picture of Jacqueline Feld
Jacqueline Feld
Advocaat