Effects of the minimum CO2 price

The coalition agreement of the Rutte III government sets out a new medium-term emission target and includes additional policy measures for this transformation: The Netherlands aim at a 49%-reduction of national CO2 emissions compared to 1990 and are planning to introduce a national carbon price floor (CPF), in addition to the EU ETS price. Furthermore, the government plans to proceed with a ban of coal in power supply before 2030.

Frontier Economics has been commissioned by the Ministry of Economic Affairs and Climate Policy of the Netherlands to analyse the potential effects of the coal ban and the introduction of the carbon price floor, as envisaged in the coalition agreement. In this report, we explain the approach of the study and present the findings of our analysis:

  • Approach – We follow a model based approach using Frontier’s European Power Market Model. The same model has been applied in our 2016-study “Research of scenarios for coal-fired power plants in the Netherlands“.
  • Main Scenarios – We analyse different policy scenarios compared to the counterfactual “Reference Case” based on current policies in the Netherlands and Central-Western-Europe. The central policy scenarios are:
    • “Coal ban”: Prohibition to use coal in electricity supply from 2025/2030 onwards
    • “CPF & coal ban”: Introduction of a national carbon price floor from 2020 and a coal ban from 2025/ 2030 onwards

Additional sensitivities around policies in the neighbouring countries are also subject of the analysis.

Research on the effects of the minimum CO2 price