Characteristics and policy instruments in the

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. 58 that would not be viable without the EIA are supported. The list of eligible measures is also a source of information on energy savings options. Other tax schemes for energy savings measures are the VAMIL accelerated depreciation scheme for environmental investments and the MIA environmental investment allowance. These tax incentives are designed to encourage investment in environmentally-friendly assets and are similar in nature to the EIA. Since 1990 the government has used a variety of grant schemes to encourage companies to save energy. Examples include grants for cogeneration plants, the tendering scheme for the CO 2 reduction plan and the Environmental Action Plan. Energy tax The Netherlands introduced a tax on energy in 1996. The tax increases the price of energy and is thus an incentive to reduce energy costs and energy consumption. The higher price of energy makes investments in low-energy products viable more quickly. The energy tax has a regressive rate structure, i.e. smaller consumers pay the highest rate. Without the European Commissions authorisation, Dutch energy tax may not be lower than the minimum rate laid down in the European directive on the taxation of energy products and electricity Directive 200396EC, 2003. An exemption has been obtained for energy intensive manufacturers in the Netherlands for electricity consumption in excess of 10,000,000 kWh in so far as the companies participate in the emissions trading system or a voluntary agreement with a best-efforts undertaking to increase their energy efficiency. The use of feedstocks see section 2.2.2 is also exempt from energy tax.

5.2 Familiarity with and appreciation of policy

instruments The in-depth audit of the manufacturing sector found that companies did not know about all the schemes available. Some 23 of the companies were not aware of any schemes whatsoever see table 3. No scheme was used by more than a quarter of the companies. More than half the companies made no use of the schemes available to them. A striking result from our survey was that only 40 of the companies were aware that energy clauses in the environmental permit were applicable to them. Furthermore, just 24 of the companies that were 59 aware of the energy clauses said they applied them. Small companies in particular were not aware of the energy clauses while policymakers had assumed that this instrument would be the main incentive for small companies, which cannot take part in the voluntary agreements, to invest in energy saving measures. We return to this in section 5.5.6. Table 3. Familiarity with policy instruments, by company size of all respondents Company size Policy instrument Small Medium- sized Large All companies Familiar with no instrument 26 11 6 23 Benchmarking Agreement 14 32 60 18 MEE Agreement 13 29 50 17 CO 2 emissions trading system 43 75 82 50 Multiyear agreements 28 49 75 33 Environmental Management Act 44 71 80 50 Tax scheme: VAMIL 53 62 69 55 Tax scheme: MIA 55 70 75 58 Tax scheme: EIA 58 77 82 62 Innovation grants 59 69 74 61 Number of respondents = 100 227 165 160 602 Source: Netherlands Court of Audit survey Most companies in this category are not eligible for the instrument concerned. Appreciation of certain policy instruments is closely related to the size of the company. Across the board, large companies are more positive about the various instruments. Small companies are the least positive about the effect of the instruments. 60 Figure 8 Percentage of companies that found an instrument to be an incentive or a significant incentive By size of company Medium-sized and large companies thought multiyear agreements provided the greatest incentive. Small companies that are not eligible for the multiyear agreements thought grants and tax schemes provided the greatest incentive see figure 8. Remarkably, there was little appreciation of the instruments across the board. The only instrument that enjoyed the approval of all companies was the multiyear agreement. If the scores are broken down by company size, this is particularly true of large and medium-sized companies. The CO 2 emissions trading system, which is targeted chiefly at large companies, is perceived as being th e least effective energy saving instrument.

5.3 Reasons for and against energy saving behaviour

A possible explanation of the underachievement of the governments energy saving targets is that the policy instruments do not agree with the target groups reasons to save energy or with the target group’s negative expectations deterring them from saving energy. A better understanding of the target groups reasons might improve the effectiveness of policy instruments. Only small-scale, qualitative studies have been made of why companies decide to invest in energy savings or not Masselink, 2008; Muthulingam et al., 2008; Rohdin Thollander, 2005; Sandberg Söderström, 2003.