Summary Benchmarking Covenant

Why a Covenant?

At the Climate Conference in Kyoto at the end of 1997, the Netherlands and the European Union promised to substantially reduce their emissions of CO2 and other greenhouse gases. One key instrument for reducing CO2 emissions is energy efficiency.

There are many industrial enterprises in the Netherlands, and these companies consume large amounts of energy. More efficient use of energy can lead to a substantial reduction in the CO2 emissions from these plants. However, there is little point in imposing heavy restrictive measures on these companies, since this would reduce their scope to continue producing in the Netherlands.

This is why the option of a covenant has been chosen. Under the terms of a covenant, the participating companies join up, conclude two-sided agreements and hence work together to achieve the maximum possible CO2 reduction. In this way, environmental gains go hand in hand with economic gains.


Who is taking part?

The covenant was signed by:

  • The Ministers of Economic Affairs (EZ) and of Housing, Spatial Planning and the Environment (VROM).
  • The Inter-Provincial Consultative Forum (IPO) on behalf of the provinces.
  • Industry is represented by the VNO-NCW Confederation of Netherlands Industry and Employers and by sectoral organisations from various industrial sectors and the electricity production sector.
Companies affiliate themselves to the covenant by means of a Declaration of Participation. All the companies located in the Netherlands can join the covenant, provided they operate premises (locations) with an energy consumption of at least 0.5 Peta Joules per year.


The aim is to be among the world leaders.

Companies taking part in the covenant enter into a highly ambitious undertaking: they pledge to make be among the world leaders in energy efficiency. These companies will therefore make maximum efforts to consume energy more efficiently, yet without compromising their international competitiveness. After all, they need go no further with the measures they take than their best global competitors.


Reciprocal obligations.

A covenant consists of a series of two-sided agreements. The participating companies undertake to turn in a leading global performance. In exchange for this, the Dutch government agrees to make a reciprocal effort. This involves the Ministers of Economic Affairs and of Housing, Spatial Planning and the Environment ensuring that:
  • No supplementary national policy governing CO2 reduction or energy conservation is imposed on these companies. In other words, the government will for example not introduce any new efficiency or CO2 targets or fix a CO2 ceiling for the participating companies;
  • No specific national energy tax will be levied on these companies;
  • The costs arising from the obligations of the Dutch government in the field of the Joint Implementation or the trade in emission rights will not be charged directly to the participating companies.
This counterpledge only applies to government policy that is directly geared towards energy consumption by processing plants. More general measures relating to fuel consumption, sustainable energy or energy consumption are not covered by the covenant. This applies equally to generic energy taxes. However, the government will, when making new legislation, take into account the efforts that have been made by these companies.

How to establish when the target has been reached?

It may sound very laudable to aim to be among the world leaders in energy efficiency. But how do you know when you have reached that level? The participating companies will have to set this level themselves, with the help of an independent consultant, by means of an international benchmark. In doing so, they will compare their processing plants in the Netherlands with similar plants abroad. The Dutch plants will need to individually measure themselves against the average energy efficiency of the best region in de world or with the best 10 per cent of the globally structured installations (excluding those in the Netherlands).

When defining the world leaders, account will also be taken of the anticipated efficiency improvements up to 2012. Moreover, the world lead must be redefined every four years. It will not be possible in every case to do this using a benchmark. For example, if a unique process is involved or if the foreign plants do not want to take part in the benchmark. In such cases, a best practice-approach will be used to define the world lead.


Towards world leadership via an energy efficiency plan.

The participating companies must be among the world leaders as soon as possible, but by no later than 2012. Companies indicate in an energy efficiency plan how and when this will happen. The covenant contains criteria governing the rate of investment. Companies must begin by taking the most cost-effective measure, followed by measures that are less cost-effective. If after this they have not reached the world lead, they can from 2008 onwards also use flexible instruments such as trade in emission rights.

The appropriate authority will evaluate the energy efficiency plan. Once it has been approved, it will be incorporated into the environmental license. This plan must be reviewed every four years, when the world lead is redefined.


Who supervises?

Effective supervision is crucial for the implementation of the covenant. The Benchmarking Committee is responsible for overall implementation. This Committee contains representatives of all the participating players. The Committee discusses a wide range of general bottlenecks, monitors the progress of the covenant and reports on this to the ministers responsible.


Who monitors?

The Benchmarking Verification Bureau has been specially established to monitor the practical aspects of the covenant. This independent bureau verifies for each company all the different stages in the benchmark process. For example, the bureau checks whether the definition of the world lead is adequately underpinned and whether the energy efficiency plan has been properly put together. The bureau also issues advice on this to the participating company and to the competent authority.

Who is already taking part?

The covenant is due to run until 2012. In 2004 it will be given its first evaluation. Nearly all energy intensive enterprises have signed the covenant. All these companies are now aiming to achieve a world lead in energy efficiency. Clearly, a covenant-based approach is one that appeals to Dutch industry.

A few companies are not participating, however. When they are ready to do so, they can still join. The more companies taking part, the better it will be for the environment!