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The Flaws in Dutch Climate Policy

Karel Beckman,

New reports from government institutions in the Netherlands have been hailed by policymakers and the press as proof that Dutch climate policy is working. Karel Beckman takes a hard look at the facts and sees a different reality. The results fall short, the uncertainties are great. What are the lessons for other countries?

Courtesy Natural Gas World.

This issue of my Gas Transitions blog should be of interest, I hope, to anyone involved in climate and energy policy. I will take a close look this week at climate policy in my home country, the Netherlands, which I believe could well turn out to be a costly failure. Why should the wisdom of Dutch climate policy be of concern to anyone besides Dutch taxpayers? At this moment all developed countries are entering a new phase in their climate policies. They are moving beyond broad reduction targets and temperature goals to the nitty-gritty of real climate measures and tough choices. The debate is not anymore about whether to reduce greenhouse gas emissions, or even by how much, but how.

From this point on there are still many different roads into the future. The Dutch example is instructive because we are talking about a wealthy, urbanised, industrialised country – a self-proclaimed climate leader within the EU. A country, moreover, that has decided to phase out the use of “unabated” natural gas for the sake of the climate. Yet already its climate policies are throwing up many lessons of how not to go about reducing greenhouse gas emissions.

What prompted me to tackle the topic was the publication last week, on 13 March, of two major reports by two prominent Dutch government agencies – PBL, the Netherlands Environment Assessment Agency and CPB, the Netherlands Bureau for Economic Policy Analysis. At the behest of the government, they have both analysed the effects of the draft national Climate Accord, which was signed on 21 December 2018 and which may be regarded as the centre piece of Dutch climate and energy policy.

The Climate Accord, the result of months of negotiations between labour unions, NGOs, business associations, local authorities and other civil society groups, which will serve as the basis for the Dutch National Energy and Climate Plan (NECP) that all EU member states have to submit to the European Commission at the end of this year, contains a large number of more or less concrete proposals to reduce greenhouse gas emissions. PBL and CPB have analysed how effective these proposals are likely to be in terms of emission reductions and have estimated their costs.

The PBL report and the CPB report are therefore key input in the political decision-making process that will now take place to turn the Climate Accord into legislation.

What the two reports show – even though their authors don’t say so explicitly and even if the general media did not notice anything amiss – is that Dutch climate policies are full of contradictions, inefficiencies and question marks that should put energy policymakers and stakeholders everywhere on the alert. Here are seven Troubling Takeaways I took from the PBL and CPB reports.

1 The cost of climate policies: anyone’s guess

One would think that the cost of climate policy would be a major concern to any society, certainly to the frugal Dutch, yet there almost seems to be a conspiracy going on among the leading political parties and the media not to confront them. This in turn gives (right-wing) opposition parties plenty of ammunition to scare the public about what the real costs might be.

The PBL report concludes that “national costs” – defined as net costs for “society as a whole, regardless of who has to pay for them” – will be between €1.6 and €1.9 billion on an annual basis by 2030. That reassuring figure was quoted widely in the press, but what few people bothered to notice is that these are only the costs of the Climate Accord additional to the costs that would have been incurred if there had been no Climate Accord, in other words, additional to a “reference scenario” (in Dutch “basispad”). That reference scenario, says PBL, is described in another PBL publication, called Nationale Energieverkenning 2017 (not available in English, unfortunately, but which can be translated as National Energy Exploration 2017). The problem is that this report does not mention any costs.

PBL did publish a report in April 2017, and an update in April 2018, about the “National costs of the climate and energy transition”. The first mentions costs of €3.5 to €5.5 billon a year, the second “over €3 billion a year”, but again those are costs additional to the costs in the Nationale Energieverkenning 2017, which are not known.

Robert Koelemeijer, researcher at PBL and one of the authors of the new report, says in a telephone interview: “It has proved to be very difficult to distinguish between the costs of the energy system as such and additional costs as a result of past climate and energy policies. But it is a question we get more often and that we do want to take a look at this year.”

Earlier this year, a group of critics – Theo Wolters, Stijn Santen, Hans Keuken, Evert van der Pol and Marcel Crok – published a report, “De kosten van het Energieakkoord” (“The costs of the Energy Accord”), which attempts to calculate the costs of the measures decided on in an earlier piece of climate legislation, called the Energy Accord, in 2013. Wolters, one of the authors, tells me it is reasonable to assume that this Energy Accord, which was actually adopted by the government and is being implemented, represents the major part of the “reference scenario” that PBL refers to.

According to Wolters c.s., the Energy Accord will cost Dutch society over €100 billion, measured over a period of 35 years, to which the costs of the Climate Accord must now be added. Their report has been criticised by various experts. Koelemeijer says: “There are some aspects about it that we don’t agree with. We are planning to analyse it in more detail.”

On the other hand, the number of €100 billion, over 35 years, does not seem so incredible. Thus, for example, the Dutch General Accounting Office (“Algemene Rekenkamer”), again an official government institution, calculated in April 2015 that the costs of renewable energy subsidies alone could amount to some €80 billion by 2030. (You can find the GAO report by following this link, click on the download, see page 15-16; or click on the blue picture below. Again, all in Dutch, I’m afraid.) Renewable energy subsidies are of course only part of the total costs of climate policy – according to the critics roughly half of the total.

Note, incidentally, that the figure of €1.6-€1.9 billion does not tell the whole story, since PBL has excluded the costs of measures in the Climate Accord that are “insufficiently concrete” at this point and about many other measures PL notes there are “uncertainties” in how they will be effectuated. Koelemeijer, however, says this does will not impact the final outcome materially.

2 The poor pay

Unlike the PBL report, which looks at “national costs”, the CPB report investigates what financial “burdens” climate policies will put on households and companies. The CPB estimates do refer to total costs of climate policies, i.e. not just the policies in the Climate Accord, but also existing policies. It estimates (see p. 5) total financial burdens of €6.8 billion per year of which the Climate Accord contributes only €1.6 billion.

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