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European Outlook Europe: vital to Dutch companies Topical issues for Europe in 2014
VNO-NCW, MKB-Nederland January 2014 2
Contents Preface 5 Introduction 7 Europe: vital to Dutch companies 7 1. Economic governance and finance 9 A sound and swift banking union 9 Access to finance 10 Towards strong economic governance 10 Common Consolidated Corporate Tax Base (CCCTB) 11 EU Action Plan to strengthen the fight against tax fraud and tax evasion 11 Financial Transaction Tax 12 Platform for Tax Good Governance 13 Value Added Tax (VAT) 13 International Financial Reporting Standards (IFRS) 14 Disclosure of non-financial information country-by-country reporting (CBCR) 15 Customs 15 Energy taxation 16 2. Competitiveness, sustainability, innovation and industrial policy 17 Smart regulation 17 Security of supply of resources 17 REACH and SMEs 18 Clean Air Policy 19 European Emissions Trading System (EU ETS) 19 Shale gas 20 Energy and Climate 2030 package 20 Environmental and Energy Aid Guidelines 21 Transport and energy 21 Innovation 22 Industrial policy package 23 3. Internal and external markets 25 State aid 25 Cyber-security 25 Acquisition fraud 26 Copyright 26 Data protection regulation 26 Telecom package 27 Proposal for Consumer Product Safety Regulation (CPSR) 28 Proposal for a Market Surveillance of Products Regulation (MSPR) 28 Revision of the Tobacco Products Directive (TPD) 29 Consolidation and merger of legislation on Consumer Rights and Advertising 30 European Accessibility Act (accessibility of goods and services to people with disabilities) 30 Trans-Atlantic Trade and Investment Partnership (TTIP) 31 3
Further multilateral trade liberalisation in the World Trade Organisation (WTO) 31 Internal Market 32 Longer and heavier vehicles, European Modular System (EMS) or Ecocombis 33 Single European Sky (SES) 33 Statute for a European Company (SE) 34 Statute for a European Private Company (SPE) 35 Action plan: European company law and corporate governance 35 Audit Regulation 36 European Retail Action Plan 37 Stimulate Omnichannel business 37 Small Business Act 38 4. Well-functioning European labour market 39 Posting of workers: proposal for the Enforcement Directive 39 Proposal to improve gender balance in boards of listed companies 40 The social dimension of the EMU 40 Restructuring 41 Health and Safety 42 Pensions 42 Index 43 4
Preface Every year, confederations of Dutch Industries and SMEs, present their view on relevant European issues. This brochure presents a short summary with our comments on what is on the agenda for 2014. European Outlook is published by the Brussels office with input of policy advisers working at the headquarters in The Hague. Current developments will be described and discussed in our monthly digital newsletter Blik op Europa and will be processed in the specific dossiers on our websites: www.vnoncw.nl and www.mkb.nl. Brussels Office Joke van den Bandt-Stel Mario van Mierlo Bram Borgman Eric Gilbers Marianne van der Mersch-Doyer Nicole Nederveen Jacqueline Vermaas Margriet Penninkhof (stagiair) Brussels, January 2014 5
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Introduction Europe: vital to Dutch companies One thing is for sure, 2014 will be an exciting year. We will have elections for a new European Parliament and at the end of 2014 we will have a new Commission and a new President of the Council. Overarching priority for businesses is promoting the competitiveness of industry, commerce and related services, in Europe, but also in relation to developments in the rest of the world. This should be the central theme for the new Commission. Companies are essential for sustainable growth and for creating jobs. To realise this growth, innovation is crucial. Europe can and will stimulate this innovation through investments resulting from Horizon 2020, but speedy time to market is essential for successful innovations, and in that respect Europe lags behind other parts of the world. Governments can also play a role as a leading customer in stimulating innovations. favour an ambitious energy and climate policy of the EU, but emphasise that it is essential to take into account the global developments and the diversity in industry in Europe. The policies in this field should be designed in such a way that companies are stimulated to invest in sustainable and innovative solutions to reduce the CO 2 emissions, but at the same time carbon leakage should be prevented. The Dutch energy agreement between Dutch industry in all its diversity, trade unions, NGOs and government could be an example of how to realise these objectives. This is only possible with better and more consistent rules and less bureaucracy. We welcome the evaluation of the whole assessment process. However, we would like to see impact assessments used not only by the Commission, but also by the Parliament and Council in case of significant changes to regulation. And of course, the internal market is essential to create an attractive market for companies in Europe. Combating protectionism and creating a real level playing field, coupled with effective enforcement is crucial in this respect. A real internal market for energy is essential for utilising the different energy carriers in the most cost- and energy-efficient way. This should lead to energy prices that are more in line with prices outside Europe. Also with regard to the digital internal market and the transport market much improvement is necessary before we really have an attractive environment for companies in Europe. And last but not least we need well-functioning, flexible European labour markets. Joke van den Bandt-Stel T: +32 (0)2 510 08 80, E: bandt@vnoncw-mkb.nl 7
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1. Economic governance and finance A sound and swift banking union The credit crunch and European debt crisis have articulated the interdependence between banks en public finances. Banks hold relatively high portions of government bonds. So if the creditworthiness of one bank has been hit, this could have direct consequences for the solidity of the government. This feedback loop goes the other way around as well, if a government loses creditworthiness this has a detrimental effect on the creditworthiness of national banks. The single monetary policy and the absence of exchange rate risk have significantly promoted the integration of financial markets. Since the introduction of the euro European banks increasingly operate within the borders of the euro area. However, the monitoring of these more international banks has remained national, as has financial support for banks in trouble. Heavily integrated financial markets require effective European supervision in order to complete market integration. At this moment the savings and credit market is fragmented and this also means that the single monetary policy has a less effective impact. From a business perspective, a banking union is of vital importance to the financial stability of companies, inter alia with respect to their credit demand and investment horizon. In particular the export of Dutch businesses also requires banks with an international network. A banking union consisting of effective European banking supervision, a European deposit guarantee scheme and a European resolution mechanism is vital to economic recovery. A banking union at European level is necessary because of strongly integrated financial markets. It is necessary to overcome problems with systemically important banks at an early stage, and to be able to close or restructure a bank if necessary with no negative effects for other banks and governments and therefore the public and companies. Systemically important European banks should turn to (national) resolution fund(s) in case of emergencies, in such a way that national public finances are not involved. The ECB will in future play a supervisory role, starting with a comprehensive assessment (finished at November 2014). Since this will be the make-or-break test for Europe s banking union, it is absolutely necessary that Europe s leaders approach the comprehensive assessment with a clear view as to the implications of its outcome and the necessary solutions. Before the results of the assessment are published it should be clear who will pick up the bill for undercapitalised banks. In December 2013, the finance ministers of finance (Ecofin) reached a definitive agreement (the interpretation of) the banking union. The systems of deposit guarantee schemes of the Member States will be harmonized, and deposits amounting to 100,000 euros are insured. If a bank fails, shareholders and bondholders have to pay the bill to recapitalize the bank, instead of taxpayers. (This is the so called bail-in.) Also a major step has been made on the Single Resolution Fund and Board. This settlement mechanism ensures that, from 2016, when a bank - despite the close supervision - is in serious trouble, an effective, privately funded, European reaction is affected. This is an important step in perfecting the banking union. Currently, trilogues between the European Commission, 9
Council of the European Union and the European Parliament are still ongoing. This means that, at the time of writing, the decision-making process is not yet concluded. It is (nevertheless) important that a single rule book is established. There should be a harmonised approach, with no discretionary powers to national authorities, because otherwise the internal market will be hampered and also the competitiveness of our banks, which leads to higher costs. That is a prerequisite for a fully-fledged and well-functioning banking union. Marjo Grondhuis T: +31 (0)70 3490 416, E: grondhuis@vnoncw-mkb.nl Access to finance Access to finance could be strengthened via the European Investment Bank. With the return of economic growth, we foresee an increase in demand for investment loans. The EIB could play an important role in addressing this demand from SMEs. Therefore an increase in the existing budget should be considered. Service provision to mid-cap companies could be strengthened as well. These companies with solid growth potential should be able to borrow from the EIB. Rob Wolthuis T: +31 (0)70 3490 414, E: wolthuis@vnoncw-mkb.nl Towards strong economic governance Europe needs closer cooperation based on binding commitments with respect to fiscal policy, with room for necessary structural reforms. A fully fledged Economic and Monetary Union is the only way ahead. The ex-ante check on budgets and the two-pack have been good steps forward. Competitiveness within Europe is diverging. Improvement of competitive strengths is the only way to rekindle growth. The macro-economic imbalances procedure signals weaknesses and imbalances within Europe. Further, Member States should be encouraged to implement structural reforms recommended by the European Commission at the national level. The framework of the European Semester constitutes a solid basis for strong and enforceable economic policies. Automatic sanctions in case of non-implementation are necessary to realise sound economic policies, without political interference. The country-specific recommendations have to take account of the structures of national economies. The recommendations could enhance structural reforms, but standardising national social policies at European level is counterproductive to restoring growth and prosperity in Europe. Contracts could potentially be a good way to ensure implementation of reforms. However, this should not lead to extra costs for countries and be implemented in a way that no moral hazard arises. 10
Paul van Kempen T: +31 (0)70 3490 210, E: kempen@vnoncw-mkb.nl Common Consolidated Corporate Tax Base (CCCTB) The Common Consolidated Corporate Tax Base (CCCTB) is a proposal developed by the European Commission for an optional additional new tax code to be adopted across the European Union. On 16 March 2011 the European Commission proposed a common system for calculating the tax base of businesses operating in the EU. Since then, a lot of technical work has been done on the proposal by the Council Working Group, but the important political questions regarding minimum rates, the allocation of profits through formulary apportionment and the optional character of the CCCTB have been put off. It seems unlikely that there will be any kind of consensus on all of these aspects of the CCCTB soon. However, the recent work regarding tax planning and tax avoidance by both the European Commission and the OECD have given the proposal some new momentum. have taken the position that they can support the CCCTB as long as the proposal meets four conditions. These conditions are (i) that the CCCTB has to be optional, (ii) that consolidation of profits and losses throughout the EU has to be possible, (iii) that Member States maintain their full sovereign right to set their own corporate tax rate and (iv) that companies benefit from a one-stop-shop system for filing their tax returns to lessen the administrative burden. The Dutch Parliament has been very critical regarding the CCCTB proposal. Since the rules for the allocation of profit in the proposal focus on capital, labour and sales, smaller, open economies in particular stand to lose a significant part of their corporate income tax revenue to the larger economies in the EU, such as Germany. In the case of the Netherlands this could amount to a loss of about a third of total corporate income tax revenue. Jeroen Lammers T: +31 (0)70 3490 423, E: lammers@vnoncw-mkb.nl EU Action Plan to strengthen the fight against tax fraud and tax evasion The OECD has put forward an action plan on Base Erosion and Profits Shifting (BEPS) with 15 separate work streams to combat the legal, but artificial segregation of taxable income and the underlying economic activities. The work streams have to yield results between late 2014 and the end of 2015. Parallel to this the EU has put forward an Action Plan to fight tax fraud and tax evasion. Belying its name, the EU Action Plan does not only address illegal activities, but also focuses on legal activities such as tax planning and tax avoidance. In this context, a Commission Recommendation on aggressive tax planning and the Commission Recommendation regarding measures intended to encourage third countries to apply 11
minimum standards of good governance in tax matters have been attached to the EU Action Plan. A great deal of focus of the EU Action Plan lies on improving the automatic exchange of information. Also, the Commission has put forward a proposal recently to amend the Parent-Subsidiary Directive so that it includes a General Anti-Abuse Rule (GAAR) and disallows the Directive s privileges where hybrid instruments are used. are of the opinion that to secure both public trust and incentivise long-term investments, job creation and growth, a holistic approach and globally coordinated action based on international consensus are necessary. Without global coordination and consensus the end result might be that there is increased double taxation and increased uncertainty about the tax treatment of cross-border business investments and activities. This may also lead to new, if not more, frictions and gaps between different countries tax systems. The EU Action Plan therefore cannot stand alone or apart from BEPS. The EU has to refrain from developing rules or regulations that are not in full accordance with BEPS conclusions. This also means that the EU has to follow the OECD timetable rather than make its own. In any case, both BEPS and the EU Action Plan should conclude that tax competition is beneficial to Member States and therefore has to be preserved. Also, both should confirm that the arm s length principle must be maintained as the norm and that any additional measures to combat unintended double non-taxation should always remain within the arm s length standards. Jeroen Lammers T: +31 70 3490 423, E: lammers@vnoncw-mkb.nl Financial Transaction Tax The EU Financial Transaction Tax (EU FTT) is a proposal made by the European Commission in September 2011 to introduce a financial transaction tax within the 27 Member States of the European Union by 2014. In 2012 it became apparent that consensus between all Member States on the FTT was impossible. For that reason it was proposed to bring the FTT under the enhanced cooperation procedure. Eleven EU Member States have consequently declared they want to implement a FTT. However, the formal agreement on the details of the EU FTT still needs to be decided upon. If the current proposal for an EU-11 FTT is implemented, the tax must be paid in the European country where the financial institution is established. The tax would impact on financial transactions between financial institutions at the rate of 0.1% on exchange of shares and bonds and 0.01% on derivative contracts. If there are two financial institutions connected to the transaction, the tax will be due from both of the financial institutions. Effectively, financial transactions would therefore be taxed at 0.2% and 0.02%. 12
The current proposal has far-reaching extraterritorial effects due to the residence and issuance principle in the FTT. This means the EU-11 FTT would cover all transactions that involve a single European firm, no matter whether these transactions are carried out in the EU or elsewhere in the world. Because of the extraterritoriality it is unclear whether a financial transaction tax is compatible with European law. The legal opinion of the European Council is that it is not, whilst the Commission says it is within the confines of the TFEU. We vehemently object to the FTT proposal. The FTT is proven to be detrimental to economic growth and job creation. This is the case both in the participating Member States and in the non-participating Member States due to the fact that the tax ultimately will not be paid by financial institutions, but will be passed on to the end-users, i.e. businesses and individuals, and because it will encourage the financial sector and businesses to try and move their operations as much as possible beyond the reach of the FTT. Jeroen Lammers T: +31 70 3490 423, E: lammers@vnoncw-mkb.nl Platform for Tax Good Governance As a spin-off of the EU Action Plan to strengthen the fight against tax fraud and tax evasion The Platform for Tax Good Governance has been established. The Platform will assist the European Commission in developing initiatives to promote good governance in tax matters in third countries, to tackle aggressive tax planning and to identify and address double taxation. It brings together expert representatives from business, tax professional and civil society organisations and enables a structured dialogue and exchange of expertise which can feed into a more coordinated and effective EU approach against tax evasion and avoidance. The Platform will also assist the Commission in preparing its report on the application of its Recommendations regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters and on aggressive tax planning. In the view of, the focus of this Platform should be on preventing double taxation and on ensuring that EU proposals are in line with international (OECD) agreements. Jeroen Lammers T: +31 70 3490 423, E: lammers@vnoncw-mkb.nl Value Added Tax (VAT) After the presentation by the European Commission of the Green Paper on the future of VAT (2010), progress has been made. Firstly it was decided that the destination system will be the definitive system. Various options of this system are subject to consultation in the VAT Expert Group. Both this group (new legislation) and the VAT Forum (implementation issues) are established by the European Commission. VNO-NCW and 13
MKB-Nederland are represented in both groups. Topical in the VAT Forum is a discussion on solutions, for instance on the burden of proof for zero-rating of intra-eu-trade. In October 2013 the Commission presented a proposal for a standard EU VAT return in order to reduce the administrative burden on business. January 2015 new legislation regarding the place of supply of telecommunications, broadcasting and electronic services will enter into force. Explanatory notes are under preparation. welcome the choice for the destination system, the institutionalisation of the dialogue with business and the initiatives to solve implementation issues. However, they are disappointed about the proposed standard VAT return with 5 mandatory and 21 optional boxes. Business needs a simple return focused only on the settlement of the VAT amount due. Regarding the explanatory notes for the 2015 rules, business input on practical issues is of great importance. Janny Kamp T: +31 (0)70 3490 419, E: kamp@vnoncw-mkb.nl International Financial Reporting Standards (IFRS) Since 2005 listed companies have been obliged to prepare their consolidated financial statements in line with IFRS (International Financial Reporting Standards). According to the so-called IFRS Regulation it is up to the Commission to decide whether or not the IFRS have to be applied by companies listed on a stock-exchange within the EU. This is done through a so-called endorsement mechanism in which the Accounting Regulatory Committee (ARC) - which consists of representatives of the Member States - and the European Financial Reporting Advisory Group (EFRAG) - a representative body of the private sector - are consulted. In recent years there has been more and more criticism of IFRS and the International Accounting Standards Board (IASB), the body responsible for preparing IFRS. Critics argue that IFRS are an ineffective tool for communication with capital markets, e.g. as a result of large scale application of fair values and an overload of disclosures. With regard to Europe being the only continent in the world where the application of IFRS is mandatory, a report was presented to the ECOFIN Council on behalf of Commissioner Barnier in November 2013. It recommends reform of EFRAG in such a manner that it can better carry out strategic analysis of the economic impact of proposed standards. European business cannot support the EFRAG reform proposals as they would not offer an appropriate representation of the private sector. Martin Noordzij T: +31 (0)70 3490 424, E: noordzij@vnoncw-mkb.nl 14
Disclosure of non-financial information country-bycountry reporting (CBCR) A proposal for mandatory reporting (CBCR) for all entities over a certain size is currently being prepared by the EU in addition to rules on CBCR already introduced for - among others - companies active in the extractive industry and in the banking sector. This would be introduced as part of the Commission s proposal on disclosure of non-financial information. The stated purposes for the introduction of a general requirement for CBCR are that increased transparency on payments to governments is necessary in order to protect revenues and ensure confidence of citizens in the fairness and effectiveness of the tax system and trust of EU citizens in companies. The proposal would require large companies whose average number of employees during the financial year exceeds 500 to disclose the several items country-by-country in a note to the company s financial statements for the financial year. By requiring the information to be provided in the notes to the financial statements, the disclosures would have to be audited. Given the evolving nature of the international tax debate, the EU should not adopt a standalone rule on country-by-country reporting. It is of utmost importance for the EU to focus on coordinating tax initiatives at international level - such as the OECD/G20 BEPS Action Plan - to promote international consistency. Martin Noordzij T: +31 (0)70 3490 424, E: noordzij@vnoncw-mkb.nl Customs On 1 November 2013 the Union Customs Code (UCC) entered into force. The UCC is a modification and recast of the Modernised Customs Code (MCC). Due to the Lisbon Treaty and its new provisions on delegated and implementing acts, and since the IT system was not operational on time, it was necessary to review the MCC. Although the UCC has entered into force, its application will not have effect until 1 May 2016 at the earliest. Certain transitional provisions will last until 31 December 2020. The implementing and delegated acts have to flesh out the details and they have yet to be negotiated by the Member States. The UCC aims to modernise the European Union customs legislation. This includes a shift to a paperless and fully electronic customs administration, the possibility of centralised clearance and the further application of the AEO (Authorised Economic Operator) system. In this legislation process, simplification of these rules and the reduction of the administrative burden remain our key focus. Together with BUSINESSEUROPE and the Dutch Ministry of Finance we will follow and contribute to negotiations on the implementing and delegated acts, which will start in 2014. It is important that the Member States retain the possibility to give maximum support and facilitation to business. Wouter Brookman T: +31 70 3490 422, E: brookman@vnoncw-mkb.nl 15
Energy taxation In 2011 the European Commission put forward a proposal to revise the 2003 Energy Taxation Directive (ETD). The current ETD does not fit in with existing business models and new technologies. Furthermore it does not provide sufficient legal certainty for Member States energy taxes. The new rules aim to restructure the way energy products are taxed in order to remove current imbalances and take into account both their CO 2 emissions and energy content. Existing energy taxes would be split into two components which, taken together, would determine the overall rate at which a product is taxed. On the ETD, the European Parliament has voted in plenary session. However, trilogue negotiations have not yet started as the European Council has been unable to reach a common position. A number of Member States are opposed to key concepts such as the level of minimum tax rates. The last presidencies have therefore been focusing on reaching a compromise only on technical elements. fully subscribe to the importance of harmonised European regulation of energy taxation as Dutch energy taxes are often amongst the highest in Europe. However, the current proposal, and particularly the interference in the relationship between national taxation rates, does not help to create a level playing field in Europe. Therefore, the proposal lacks added value, also because (as the impact assessment shows) it would not contribute to a further reduction in CO 2 emissions. Willem de Goede T: +31 (0)70 3490 365, E: goede@vnoncw-mkb.nl 16
2. Competitiveness, sustainability, innovation and industrial policy Smart regulation Smart regulation should ensure that EU legislation is fit for purpose and proportionate. This is crucial for strengthening competitiveness. The Commission launched the Regulatory Fitness and Performance Programme (REFIT) to map the entire stock of EU legislation with a view to identifying burdens, gaps and inefficient or ineffective measures and possibilities to simplify, reduce or repeal them. Furthermore a Top 10 most burdensome EU laws for SMEs has been identified, but this has not led to new proposals. The intentions of the Commission are good, but the programme lacks concrete, quantitative targets and a clear timeframe. It is thus unclear if and when businesses can expect tangible results from REFIT. Not only will quantitative targets make the efforts of the Commission measurable, they will also focus the efforts of the relevant Commission services, Council and Parliament in achieving real reductions of burdens. We promote a one-in, one-out policy, which would mean that the Commission only needs to measure the regulatory burdens of new proposals and the costs of compensation measures. Many regulatory burdens are added in the co-decision phase and some fundamental changes are needed to improve the quality of amendments, which should take into account the effects on regulatory burdens on business. will present a white paper to the Commission in 2014 with ideas to accomplish this. Ramona van den Bosch T: +31 (0)70 3490 319, E: bosch@vnoncw-mkb.nl Security of supply of resources The Netherlands has a resource-intensive economy and consequently security of supply is of great importance to Dutch business. As the world is facing a period of intensifying resource stress, security of supply of (biotic and a-biotic) resources and resource efficiency has to be high on the agenda of company boards and the ministry of Economic Affairs. Over the last years, the EU has launched several initiatives to address these problems. These policy measures vary from the Raw Materials Initiative (RMI) - which addresses the security of sustainable supply of non-energy raw materials for the EU - to the introduction of resource efficiency indicators and measures to stimulate a circular economy. warmly welcome the EU s activity on this matter, as they put resource-related issues on the agenda. Although businesses are developing a wide variety of their own (sectoral) initiatives, there is still a role for both national governments and the European Commission to play. In this light, would like to urge the European Commission to increase its efforts to facilitate the 17
generation of information on the functioning of international resource markets and the subsequent distribution of this knowledge. Another role the Commission can play is in the field of diplomacy directed at countries which are of strategic importance for Europe with regard to mining of raw materials. Furthermore Dutch business would like the European Union to stimulate innovation in the field of resources and remove barriers in the shipment and processing of waste. Willem-Henk Streekstra T: +31 (0)70 3490 359, E: streekstra@vnoncw-mkb.nl REACH and SMEs Recently the Dutch government did research on the costs of REACH within SMEs. The results show costs that are much higher than expected. SMEs (production and trade) are confronted with average annual costs of 25,000 - other SMEs downstream 10,000. Therefore urged the Dutch government to upgrade efforts to identify methods and means to lower the costs for complying with REACH. We stress that it is really necessary to reduce costs of REACH, for otherwise support for this regulation will diminish and the implementation of REACH will be hampered. The Dutch government accepted this proposal and in the coming year an action plan will be developed, in close cooperation with relevant sectors. The action plan will focus on measures which the Dutch government and sectors can take. But we believe also the Commission and ECHA have a role to play. We see possibilities at European level to lower administrational burdens with the following ideas: ECHA Provide further guidance concerning communication practices and sharing costs within SIEFs. Develop guidance specifically catering for manufacturers and importers that have to meet the 2018 deadline ( 1-100 tonnes Guidance ). Propose minimum information provision requirement concerning the fees for letters of access with a breakdown of the costs in order to achieve higher levels of transparency. Clarify the role of Only Representatives in relation to authorisation procedures and in terms of their responsibility in the exchange of information with importers. Simplify procedures, standardise and develop templates to relieve administrative obligations. Harmonise electronic Safety Data Sheets template in Europe. European Commission Provide for more alignment with adjacent directives and regulations (e.g. biocide directive, cosmetic regulation). Explore, in cooperation with the Member States, the possibilities of fiscal measures (extended write-off periods) to mitigate the financial burden. Evaluate the efficiency of the current value chain information tool (SDS), particularly taking into account: o usability for downstream users; o possibilities offered by information technology. 18
Willem-Henk Streekstra T: +31 (0)70 3490 359, E: streekstra@vnoncw-mkb.nl Clean Air Policy As public concern about the links between air quality and public health rises, governments have been asked to review their air quality policies. In December 2013, the European Commission presented a proposal for the so-called EU Clean Air Policy Package. Inter alia, the package includes a revision of the NEC directive (National Emission Ceilings) and a proposal for a directive regulating emissions from medium-scale combustion plants. The Netherlands is a densely populated country, which faces pollution from industrial areas in neighbouring countries and has relatively large industrial and transportation sectors. Therefore the proposed EU Clean Air Policy Package - especially the revision of the NEC-directive which updates ceilings for six key air pollutants (PM, SO2, NOx, VOCs, NH3 and CH4) - potentially is of big impact on Dutch business. support a health- and environment-based approach of the revision of EU air quality policy, but are of the opinion that the Industrial Emissions Directive (IED) should be the leading framework for permitting industry to reduce emissions. The Commission should formalise the dominant position of the IED as the regulatory basis for reducing emissions. In addition, urge the EU to focus on proper implementation and enforcement of current legislation right across Europe in order to create a level playing field. Furthermore, the relationship between reducing CO 2 emissions (e.g. by the introduction new fuels) and other emissions should be taken into account. Willem-Henk Streekstra T: +31 (0)70 3490 359, E: streekstra@vnoncw-mkb.nl European Emissions Trading System (EU ETS) The EU Emissions Trading System (EU ETS) sets a cap on the total amount of greenhouse gases that can be emitted by factories, power plants and other installations. The cap is reduced over time so that total emissions fall. In 2020, emissions from sectors covered by the EU ETS will be 21% lower than in 2005. Recently, the EU ETS has come under discussion. On the one hand it is seen as providing too little protection against carbon leakage, and on the other hand it is deemed to provide too little incentive for the reduction of CO 2 emissions because of the volatility of CO 2 prices. The European Commission is looking at options to change the way the ETS works. VNO-NCW en MKB-Nederland believe that the EU ETS should be maintained as the main incentive over the long term to reduce emissions by industry and other covered sectors and to promote investments in low-carbon technologies. However, the protection against carbon leakage should be strengthened and the structural flaw (a constant supply of allowances coupled with fluctuating demand) that causes volatile CO 2 prices should be corrected. 19