System operators can collaborate in order to reduce CO2 emissions
System operators for electricity and natural gas can work together in order to reduce CO2 emissions. That is one of the main conclusions of the Netherlands Authority for Consumers and Markets (ACM) following a preliminary assessment of plans that the system operators submitted. These plans involve jointly determining a price for emitting one ton of CO2, which they can use in investment calculations.
What was this case about?
Over the next few years, system operators will have to invest in grids and natural-gas networks. These investments are necessary for the transition towards sustainable energy, among other reasons. Construction, operation, and utilization of these networks produce CO2 emissions. If additional investments are made, these CO2 emissions can be reduced.
In 2021, system operators sought to reach mutual agreement on using a price of 50 euros (initially) per ton of CO2 in purchase and investment decisions. That makes it more interesting to make investments that lead to CO2 emission reductions. After all, the less CO2 they emit, the lower the costs are. This price will be raised using a growth model, which means this CO2 price will be in line with the most up-to-date price for a ton of CO2 in the international CO2 emissions trading system ETS. When raising the CO2 price, system operators use the most recent environmental prices that the CPB Netherlands Bureau for Economic Policy Analysis (CPB) and the PBL Netherlands Environmental Assessment Agency (PBL) use for a ton of CO2. ACM assessed these plans in the fall of 2021. The system operators have already raised the calculation price to 100 euros since.
What is ACM’s opinion?
Businesses are allowed to work together in order to help achieve climate goals. ACM has tested this collaboration against the Dutch Competition Act. The price of 50 euros per ton of CO2 does not have an appreciable effect, and, as such, will not restrict competition, although a different outcome would be possible if prices for CO2 were higher. That is why ACM assessed whether this collaboration qualified for an exception to the cartel prohibition. When assessing these kinds of sustainability agreements, ACM determines whether the benefits outweigh the costs. ACM has come to the conclusion that, even with a higher price for CO2, the benefits outweigh the potential costs.
Moreover, consumers are allowed a fair share of the benefits, the collaboration is necessary for reaping the benefits, and sufficient competition will remain in the market. That is why this collaboration falls under the exception of the cartel prohibition, which means that the system operators are allowed to work together in this area.
Want to know more about cooperation and sustainability? Visit our page on Cooperation and Sustainability (in Dutch).