Competition Law And Environmental Protection: The Dutch Agreement On Coal-Fired Power Plants

Agreements between firms to jointly reduce production capacity generally violate competition law, unless specific conditions are met. These conditions imply that the agreements need to realize benefits for consumers that could not otherwise be realised. Together, we call them “efficiency defence.” Initiated by a societal debate in the Netherlands, we analyze how environmental benefits can be included in this framework. We apply this analysis to a proposed agreement among electricity producers to jointly advance the closure of a number of coal-fired power plants. Using shadow prices as developed in environmental economics, we assess the environmental benefits of this proposed agreement. We conclude that the environmental benefits for the consumers involved are significantly smaller than the loss of consumer welfare resulting from the increase in the electricity price caused by the closure of power plants. Hence, such an agreement would infringe competition law. This case, however, shows that it is feasible to incorporate environmental effects into an efficiency defence of an anticompetitive agreement made for the purpose of sustainability.