Netherlands further locked in? Council of State limits internal netting of nitrogen emissions

The court rulings

The Council of State's rulings refer to appeals against the Amercentrale ruling and Rendac ruling by the District Court of Oost-Brabant that were passed around the turn of 2022. In those rulings, the court had "nuanced" the Council of State's then established line of case law on internal netting. This established line of case law entailed that internal netting, which is about cancelling out the positive and negative effects for nature against each other within a project or plan, was possible without a permit if, on balance, the nitrogen deposition on overloaded areas did not increase. In order to determine this, it is necessary to set off the effects of the modified or new activity against the reference situation. According to established case law, this was the permitted situation on the designation date of the Natura 2000-area in question, to be derived from a nature permit or, in absence thereof, an environmental permit or permission. If restrictions had been placed on that permit after that time, then that more restricted scope applied as the reference situation. 

For Rendac, the contested 2020 nature permit specifically concerned the conversion of a steam boiler, the realisation of a new biogas engine and the change in operating hours of already existing biogas engines. Part of the reference situation are the emission sources "grease engine" and "CHP plant", for which previously a permit was granted, but were ultimately not realised (para. 4.1 ECLI:NL:RVS:2024:4923).

For the Amer power plant, the contested nature permit was granted in 2019 for:

• decommissioning AC-8 (one of the power plant's two coal-fired base units, with a capacity of 645 MW) as of 1 January 2016,

• the installation of a new boiler house containing four natural gas-fired hot water boilers to serve as a backup for heat supply from AC-9 (the second base unit of the power plant that following the change will remain the only one in operation),

• not realising the hammer mill building licensed in 2011,

• the realisation of the biomass storage silo licensed in 2011,

• complete transition to biomass,

• installing solar panels on the former cooling water pond in 2019 (para. 6.4 ECLI:NL:RVS:2024:4909).

The District Court of Oost-Brabant ruled that internal netting is not in line with the Netherlands' obligations under Article 6(2) of the Habitats Directive to take appropriate steps to avoid the deterioration of the state of protected nature. The Council of State disagrees with that line of approach, but does change its case law through another line of reasoning. This means that the granted nature permits for Rendac and the Amer power plant remain annulled and the council of the Provincial Executive of the Province of North Brabant, as the competent authority, must make new decisions on the previously submitted applications.

The key points from the Council of State's rulings

The granting of a permit is separate from the obligation to take appropriate measures

• The Council of State maintains the line that the assessment of a permit application (pursuant to Article 6(3) Habitats Directive) is separate from the obligation to take appropriate measures (pursuant to Article 6(2) Habitats Directive). Thus, in the case of an application for a new nature permit, this part of the Habitats Directive does not entail the obligation to then re-evaluate the already licensed activities (para. 14.2 ECLI:NL:RVS:2024:4923).

• Do not that, as discussed below, there is an obligation to include existing activities in a permit application under the 'additionality' requirement.

• In addition, there are other instruments that apply to existing activities, such as the obligation for the provinces to take conservation measures and appropriate measures, where the revocation of permits can also qualify as an appropriate measure (para. 14.3 ECLI:NL:RVS:2024:4923).

In principle, internal netting is not allowed in the preliminary assessment but must be done through an appropriate assessment and a permit application

• With a preliminary assessment it is assessed whether a nature permit application is required. If it cannot be definitively excluded  in advance that an activity may have significant adverse effects, an appropriate assessment must then be prepared and the activity is subject to a permit requirement. Case law to date has been that internal netting is included in this preliminary assessment. 

• Based on rulings by the Court of Justice, the Council of State now concludes that preliminary assessment may not include internal netting. This is only allowed at a later stage in the appropriate assessment as part of the then mandatory permit application. At that time, the beneficial effects can be included as a mitigation measure. This is the same line that already applies to 'external netting', which concerns the balancing of effects that do not belong to the same project or plan.

• As an example, it is cited that if an agricultural company with three barns wants to build a fourth barn under the implementation of emission reduction measures for two existing barns, the effects of the operation of all four barns as envisioned after that modification must be assessed (para. 17.5 ECLI:NL:RVS:2024:4923).

Exception for continuation of one-and-the-same project

• If there is a continuation of the same project, no assessment is needed as to whether there could be significant negative effects. In that case there is no (new) project and no nature permit requirement. 

• This exception will not occur often. The Council of State itself notes that in the "vast majority of situations" there will be no continuation of the same project (para. 17.2 ECLI:NL:RVS:2024:4923).

• It follows from previous European case law that one can only speak of one and the same project if the nature or conditions under which it is carried out do not change. This will not easily be the case; for example, modernisation activities due to new safety regulations may already cause a change of a project ( ECJ EU 29 July 2019, ECLI:EU:C:2019:622, para. 128-132 ).

Exception for 'inherent standard components'

• As regards its change of course, the Council of State refers to the Court of Justice's "Eco-Advocay" ruling (June 15, 2023, ECLI:EU:C:2023:477). 

• Eco-Advocacy explains that "inherent standard components," also explained as "measures that are mandatory for all projects of the same species," may be included in a preliminary assessment.

Permit application must cover the entire project after modification

• If a permit application is required, it must pertain to the project. If it is an amended continuation of an existing situation, the application must consider the entire project after alteration, including the unamended parts (para. 17.7 ECLI:NL:RVS:2024:4923).

• An appropriate assessment must be prepared for the project. 

• In the appropriate assessment, from which assurance must be obtained that a project will not affect the natural characteristics of a Natura 2000 area (unless in exceptional situations a permit can be granted on the basis of an 'ADC test'), mitigation measures may be included. The effects of changing or ending a component of an existing permitted situation can thus be included in the appropriate assessment (para. 18 ECLI:NL:RVS:2024:4923).

• As a rule, the likely benefits of the use of netting must be established at the time of the appropriate assessment (para. 20.1 ECLI:NL:RVS:2024:4923). 

• It must be ensured that those positive measures have taken effect before the effects of the intended (amended or new) project will occur. Double use of the measures must be avoided (para. 20.2 ECLI:NL:RVS:2024:4923). 

• In general, the foregoing can be safeguarded by including regulations in the new nature permit covering the entire project after alteration (para. 20.3 ECLI:NL:RVS:2024:4923). The competent authority must consider which safeguards are necessary and appropriate on a case-by-case basis (para. 20.4 ECLI:NL:RVS:2024:4923).

Reference situation derived from environmental permits more limited than before, including for external netting

• For the question of where to set off the effects of the (amended) project, the reference situation is important. There are two options for this:
  1) If previously a nature permit was granted, in short, the permitted situation applies as the reference situation. Even if an activity is not factually present yet, but can still be realised and put into use, this can be included (para. 19.2 ECLI:NL:RVS:2024:4923). 
  2) if netting is done with a previously granted environmental permission, netting is only possible with the effects belonging to components that have actually been realised and are structurally in use. Components that have been realised but are structurally no longer in use may only be used if they can be brought back into use without a nature permit. Unused space, i.e. components that have been realised but are not actually being used, may be included in the reference situation (para. 19.3 and 19.4 ECLI:NL:RVS:2024:4923).

• The reference moment for 1) and 2) can be the moment of filing the new application, but also an earlier objectively determinable moment such as that of entering into an agreement to take over rights (para. 19.2 and 19.3 ECLI:NL:RVS:2024:4923).

• The abovementioned rules also apply to external netting. Thus, this also constitutes a change in the case law for external netting, making it more stringent (para. 19.5 ECLI:NL:RVS:2024:4923).

• A PAS permit (a permit under the previously declared non-binding programmatic approach to nitrogen) can also be used to net. However, double use when netting must be avoided. This is the case if netting is done with a company that has not been included within the PAS as cessation-space (para. 19.6 ECLI:NL:RVS:2024:4923).

Use of internal netting may be further limited by policy

• If the permit requirement applies, which will be much more common than before, the competent authority may have a policy on what may be included in the reference situation.

• It can thus also be determined, after weighing the interests involved, to still limit the use of unused space, or to skim off part of the positive netting effect (para. 19.9 ECLI:NL:RVS:2024:4923).

Authorisation can only be granted if the additionality requirement is met, just as with external netting

• Given the above, internal netting must be considered in the appropriate assessment for a permit application and qualifies as a mitigation measure.

• Under the PAS ruling, mitigation measures can also qualify as a conservation measure or appropriate measure required pursuant to the Habitats Directive. In that case, the measure can only be used as a mitigation measure if the measure is not already required pursuant to the Habitats Directive. This is the case if (i) the conservation of the natural values in the Natura 2000 area is ensured by (other) conservation measures, and (ii) it is ensured that achieving the restoration and improvement objective remains possible. This is referred to as the additionality requirement (para. 21.1 and 21.2 ECLI:NL:RVS:2024:4923). In the PAS ruling, the additionality requirement is explained in para. 13.5-13.7.

• The additionality requirement applies to 'the deployment of the entire reference situation used as a mitigation measure'. Not only the amendment or termination of certain components of the existing permitted situation must meet the additionality requirement, but also 'the continuation of components of the existing permitted situation (para. 21 ECLI:NL:RVS:2024:4923).

• The permit applicant must include the data to assess the foregoing in the appropriate assessment (para. 21.4 ECLI:NL:RVS:2024:4923).

• The competent authority must then carry out the assessment. If it is decided that netting  can be used as a mitigation measure for the application, the permit must be accompanied by a justification as to how the obligation to take conservation and appropriate measures will then be fulfilled. The competent authority can do so by explaining what other measures have been or will be taken, within what time frame these measures will be implemented and when they are expected to have effect (para. 21.3 ECLI:NL:RVS:2024:4923).

The new line is effective immediately and applies retroactively from 1 January 2020

• The Council of State has explicitly considered that this new line will apply with immediate effect, including in pending permit and appeal proceedings.

• Thus, this also applies to existing activities for which it was just established by previous case law that there was no permit requirement as of 1 January 2020 . 

• This is also the case if a nature permit application was submitted and the competent authority refused it because no permit was needed, also referred to as a 'positive refusal' (para. 24.6 ECLI:NL:RVS:2024:4923). 

• And also if with the submission of a Wabo application it was assessed that there was no obligation to include ('latch on') the nature part (r.o. 25.1 ECLI:NL:RVS:2024:4923).

• For all such activities, it must still be ascertained whether there is still a permit requirement on the basis of the framework set out in the rulings, and if so, the permit must be applied for and assessed on the basis of the new framework set out (para. 23 and 24 ECLI:NL:RVS:2024:4923).

Transition period: no enforcement for activities that commenced between 2020 and 2025 in line with the law

• The Council of State provides for a transition period until 1 January 2030.
• During this period, the competent authority may not take enforcement action due to the lack of a nature permit against activities that have physically started between 1 January 2020 and 1 January 2025, that are still under construction or still being operated after that date, and for which it could be assumed on the basis of the previously applicable case law on internal netting that no nature permit was required.
• During that transition period, the person carrying out the activity must take action. If a nature permit is still required for the continuation of the activity, it must be applied for, or the activity must be amended in such a way that no nature permit is required (para. 24.4 ECLI:NL:RVS:2024:4923).
• During that transition period, the competent authority may, where appropriate, take other measures that were possible anyway, such as applying the specific duty of care or imposing tailor-made regulations (para 24.4 and 24.5 ECLI:NL:RVS:2024:4923).

Recovery measures

• The Council of State points out that 'a plan already in progress, programme or package of measures justifying the conservation and appropriate measures necessary to give effect to Article 6(1) and (2) of the Habitats Directive may be helpful in assessing whether the additionality requirement has been met'. 

• The Council of State does not indicate whether or not such a plan, programme or package currently exists.

• The District Court of Midden-Nederland (ECLI:NL:RBMNE:2024:6902) made a less circumlocutory appeal on the same day as the rulings discussed here: 'However, the court finds that it cannot be explained to society that the government still has not made a clear choice or has no concrete, elaborate plans. The court reiterates its call from 2021 and calls on the current administration as well as the current legislature to take their joint responsibility."

The Council of State also outlined the assessment framework for internal netting in a diagram accompanying the press release. That diagram can be downloaded in enlarged form here (in Dutch).

Questions for in practice

The practice of internal netting, including with unrealised activities, caused many questions in practice and divergent court decisions, as explained by the Council of State in para. 16.1 of ECLI:NL:RVS:2024:4923. In addition to this turnaround, the Council of State's new line provides more clarity for practice and answers several legal questions. It also addresses the sense of discontent in the use of unrealised components of old environmental permits. Also, the reintroduction of the permit requirement if internal netting is used can possibly provide more grip on activities and, if a permit is granted, also more legal certainty for initiators.

However, new questions are arise, such as:

• What falls under 'continuation of one-and-the-same project' for which no permit is required?

• What are the 'inherent standard components' that are allowed to be included in a preliminary assessment rather than only in the appropriate assessment as part of a permit application?

• How will the verification of the additionality requirement play out, and specifically for already existing and permitted components that will be continued? 

• How does it affect the assessment of the additionality requirement if, for example, a province has a policy of skimming nitrogen space in internal netting?

• What policies will the provinces, possibly again jointly and with LVVN, adopt?

• How will the already overburdened provinces handle the increase in nature permit applications, including the backlog from 2020?

• Will there be a national or provincial wide plan, programme or package of measures justifying the necessary conservation measures and appropriate actions?

In any case, the changed case law again creates more uncertainty in practice, and, as the Council of State itself mentions, more limited use of netting which can lead to the postponement or cancellation of projects or plans.