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5 Energy saving opportunities in
the manufacturing sector
This chapter presents the main findings of our in-depth audit of the manufacturing sector. The in-depth audit asked three questions:
What reasons, objections and preconditions encourage one manufacturer to invest in energy savings and another not to?
What are the cost benefit ratios of the governments policy instruments to save energy in the manufacturing sector?
To what extent do policy instruments agree with the companys energy saving reasons and do those that agree more work better?
5.1 Characteristics and policy instruments in the
manufacturing sector
The distinction between energy intensive industries and other industries in the manufacturing sector is very important. Energy intensive
industries, such as refineries and chemical and base metal companies, together accounted for 28 of national energy consumption in 2008 CBS
et al., 2010a. The manufacturing sector as a whole was responsible for 42 of national energy consumption in 2008 CBS et al., 2010b.
The key instruments in the fourth Balkenende governments energy and climate policy for the manufacturing sector were the CO
2
emissions trading system and the voluntary and multiyear agreements. The key
instrument for companies not participating in the voluntary agreements or the trading system was the Environmental Management Act. The
instruments were backed up with financial schemes such as grants and fiscal instruments.
Below, we look at the assumed operation of the policy instruments. The audit is based on the adopted policy and did not consider whether the
underlying policy assumptions were correct. The European CO
2
emissions trading system Although the trading system is designed primarily to reduce CO
2
emissions, we included it in our audit as an energy saving instrument
56
because a it is the most important instrument the government can use to influence energy consumption in the energy intensive manufacturing
sector, and b energy savings are an important yet relatively inexpensive way to reduce CO
2
emissions. Alternative ways to reduce CO
2
, such as increasing the share of renewables or carbon capture and storage,
currently do not make a significant contribution to CO
2
reduction. The European Commission is responsible for the design of the emissions
trading system. In the system, companies must pay for the CO
2
they emit into the atmosphere. The instrument is a cap and trade system. The
European Commission places a ceiling ‘cap’ on CO
2
emissions in the EU and companies are awarded or must purchase emission allowances that
they can buy and sell ‘trade’. This creates a price for CO
2
emission allowances. All emission allowances together form the emissions cap.
Lowering the emissions cap encourages companies to reduce their CO
2
emissions. Following an initial period with a high cap, the emission allowances will be
reduced by more than 35 million tonnes per annum from 2010. The European Commission has calculated that lowering the cap in this way will
achieve the goal of reducing the participants CO
2
emissions by 21 by 2020 relative to 2005. Furthermore, it believes this is roughly equivalent
to the target of cutting CO
2
emissions as a whole by 20 by 2020 relative to 1990. These calculations will be reviewed if the trading system
is extended to include new industries or if the overall reduction target is raised European Commission, 2010. Participation in the trading system
is not voluntary. All companies in the manufacturing sector that emit more than a given volume of CO
2
must have CO
2
emission allowances. To date, the allowances have been awarded free of charge.
Voluntary agreements The Dutch government has concluded voluntary energy saving
agreements with individual companies for successive periods. Participants in these multiyear agreements receive support to prepare energy saving
plans. Industry organisations are also engaged to investigate energy saving options relevant to their industries. This is in keeping with the
governments ambition of sharing energy saving techniques. By allowing companies to use their energy saving plans to comply with the energy
clause of their environmental permits they are more likely to implement them.
The first multiyear agreements ran from 1989 to 1999. During this period the participants were responsible for about 75 of energy consumption in
57
the manufacturing sector. The second period ran from 2000 to 2008. Since the energy intensive manufacturing industry switched to the
Benchmarking Agreement see below at the end of the first period, the second multiyear agreements represented just 15 of manufacturing
energy consumption. The third period of multiyear agreements began in 2008.
A voluntary agreement was introduced for the energy intensive manufacturing sector in 1999: the Benchmarking Agreement. The
participants undertook to have their plants rank amongst the most energy efficient in the world by 2012 at the latest. The Benchmarking Agreement
was succeeded in 2009 by the MEE Agreement,
31
which was concluded with a large number of participants in the CO
2
emissions trading system. Unlike the Benchmarking Agreement, the MEE Agreement requires a duty
of best efforts to achieve the energy saving target and an obligation to prepare an energy efficiency plan.
Environmental Management Act The Environmental Management Act
32
requires companies to invest in energy efficient technology provided their financial situation permits.
Provinces and municipalities are responsible for implementing the Act and they can impose energy saving measures with a payback time of five
years if a company consumes a certain amount of energy.
33
This provision in the Environmental Management Act does not apply to companies
participating in the CO
2
emissions trading system VROM EZ, 1999. The Act requires companies to study energy saving opportunities.
Effective enforcement of the Act would mean that companies take all energy saving measures that pay back their costs within five years.
34
Tax schemes and grants The Energy Investment Allowance EIA was introduced in 1997 for
companies that invest in innovative energy saving measures. They can deduct part of their investment costs from taxable profit. A new list of
measures is drawn up every year with innovative techniques and equipment that qualify for the EIA. If a measure is invested in frequently
and becomes more viable, it is removed from the list so that only those
31
MEE: Multiyear Energy Efficiency Agreement for ETS companies ETS: emissions trading system.
32
Since 1 October 2010, the Environmental Law General Provisions Act has formed the legal basis for environmental permits.
33
More than 50,000 kWh of electricity or 25,000 m
3
of gas per annum.
34
As noted in section 2.3.2 of part 1 of this report, the assumption that municipalities and provinces are capable of determining a companys financial position in such detail is curious.
