The Dutch climate agreement was presented on June 28, 2019. The Netherlands is committed to a pioneering role within the European Union and beyond. We are not going to do more than other countries, but we will introduce the measures quicker. This will give the Dutch industry the opportunity to gain a head start in the international economic transition.
The ambition of the industry: 14.3 Mton CO2 reduction and a leadership role
The Netherlands has a strong ambition to show that complex system changes are not only possible for industry, but also provide competitive advantages. In concrete figures, there will be a 59% CO2 reduction for the industry compared to 1990. This means that by 2030, the Dutch industry must reduce its CO2-emissision by 19.4 Mton, or 14.3 Mton on top of the basic path of PBL. This is a tough task, also in comparison with other sectors (3.4 Mton reduction in the built environment, 3.5 Mton in agriculture, 7.3 Mton in mobility and 20.2 Mton in electricity).
The climate agreement takes into account the fact that the realization of this reduction task must go hand in hand with maintaining an attractive business climate. The climate is not helped if industrial activity relocates abroad.
The pillars for industry in the climate agreement
The climate agreement focuses on:
- A leading position for the Netherlands in making industry more sustainable
- The power of the regional clusters, with a key position for the “big twelve”
- Cost reduction of new technologies, with a transition role for CCS
- National CO2 tax for industry and a broadened SDE+ scheme
1. Leadership position for the Netherlands in realising a sustainable industry
The Netherlands does not wish to do more than other countries, but is introducing the measures more quickly to claim a leadership position. In this way, Dutch industry can build up a lead in the international economic transition. However, it is imperative that the Netherlands remains competitive during this transition.
One of the opportunities here is to strengthen the European ETS. Within this system, companies must have emission rights for their emissions. The industry receives free allowances up to the level of the top 10% of their competitors. The European benchmark is that if an installation is less efficient than the 10% best-performing competitors, the company must purchase emission allowances for emissions that exceed the European benchmark. As a result, companies with the cheapest reduction options will be the first to take measures and thus constantly raise the benchmark. As the industry in the Netherlands uses CO2 more efficiently, thereby tightening European benchmarks, sustainability of the industry can be encouraged elsewhere.
2. Frontrunner programs within the regional clusters
Unlike many other European countries, the Netherlands has strong regional clusters. Where the Top Sector policy has been sector-driven in recent years, it has now been decided to modernize it into a mission-driven innovation policy that supports the interweaving of sectors. An example is the use of industrial waste heat in the built environment.
In the five industrial cluster regions, the “big twelve”, together responsible for 60% of industrial CO2 emissions, play a key role. Many other companies depend on these energy-intensive companies for their activities. The “big twelve” are able to be global players in their sector, meeting the highest CO2 emission requirements and constantly raising the bar through innovation. They are asked to stand up as the initiators of the multi-year frontrunners programs in the regions, where efficiency improvement goes hand-in-hand with sustainability, CO2-reduction and maintaining international competitiveness. These programs will be independently monitored.
An integrated approach in the industrial regions is supported by:
- A regional implementation structure that bundles expertise and capacity for action at the regional level and strives for as much synergy and support as possible.
- The making of an inventory of the infrastructure needs of the industry and the solution of coordination issues that arise with regard to infrastructure. A task force will be set up that will complete this inventory by the end of 2019 at the latest. At the same time, the government is taking the lead in a structural consultation with our neighboring countries regarding cross-border infrastructure.
- A knowledge and coordination point that promotes coordination between industrial regions and signals regional issues that require national solutions.
- National coordination of bundled permit procedures or participation in programs in which several subsidies must lead to the timely implementation of projects in mutual coherence.
- Monitoring the progress of industrial transformation in the regions and its infrastructural consequences.
In the labor market there are risks for both employers and employees. Those who work in fossil-oriented sectors may lose their jobs in the transition, while on the other hand there may be a shortage of skilled personnel. It is therefore crucial that labor market policies in the region anticipate the regional energy transition.
Thanks to this integrated policy in the region, the industrial clusters can position themselves as a testing ground and acceleration chamber. It also serves to realize synergy opportunities across the borders of the sectors. The regional interdependence of sectors also offers opportunities to link the industrial energy transition with the circular economy agenda.
3. Cost reduction of new technologies, with CCS
It is necessary to develop new processes and technologies that are available, reliable and affordable. In doing so, we need to look further than 2030, because the technologies that enable an almost CO2-free industry still need to go through a development and up-scaling process. This includes, among other things, electrolysis of water (sustainable hydrogen), electrification, CCU(S), circular processes, better use of residual flows and green gas and heat decoupling.
The climate agreement states that we must focus on everything that helps us to reduce CO2 emissions as quickly as possible, we cannot wait until perhaps better solutions are found. That is why the use of CCS is also encouraged. To prevent the deployment of CCS from being at the expense of techniques that are necessary for the transition in the long term, the subsidization of CCS is limited:
- “Sieve”: CCS is only subsidized in places where there are no demonstrable cost-effective alternatives at that time.
- “Ceiling”: a maximum of 7.2 Mton CCS is subsidized for the 14.3 Mton emission reduction required in industry in 2030.
- “Horizon”: after 2035 no more SDE+ subsidies will be issued for CCS applications.
4. National CO2 tax for industry and a broadened SDE+ scheme
In addition to the enhanced ETS, energy tax and raising the ODE tax, there will be a national CO2 tax. This will start in 2021 and encompasses 2 goals. These goals are guaranteeing a 14.3 Mton reduction and preventing leakage from and encouraging investment in the Netherlands. The measure strives for a fair distribution of burdens and is used in a budget-neutral manner.
The CO2-tax is expected to start in 2021 at €30 per tonne of CO2 and to increase to €125-€150 per tonne of CO2 in 2030. These prices include the ETS price. The CO2-tax will only apply to emissions that must be avoided by 2030 (avoidable emissions). In this context, the climate agreement looks at both emissions at the individual company level and emissions that can be avoided through collective action in the regional clusters (for example, through the use of green hydrogen). To stimulate collective action, it becomes possible for companies to exchange individually allocated exempt emission allowances.
The target group of the CO2-tax largely corresponds to the target group of ETS, but also applies to waste incineration plants. The CO2tax will therefore apply to approximately 250 companies / installations and approximately 82% of all industrial greenhouse gas emissions.
A budget-neutral commitment means that the CO2 tax is not intended to generate revenue, but rather to encourage companies to make investments in the Netherlands. Any revenues will be channeled back through a subsidy scheme for the greening of the industry.
In addition to a CO2 tax, there will be a broadening of the SDE+ scheme, which supports the roll-out of CO2-reducing measures and is traditionally financed by the Sustainable Energy Storage (ODE). As of 2020, the share of companies will go from half to one third of the ODE. The large-scale users will bare the burden of this increase and will ensure that the industry will contribute a total of more than €5 billion to the ODE up to and including 2030. A direct consequence is that the tax burden on energy use in industry is higher than in other countries.
Conversely, the industry will receive more than €3 billion by 2030 from the broadened SDE+. This scheme does not create an advantage, but only removes a disadvantage because it only compensates for the “loss” on an investment that would not have been made without SDE+.
ISPT programs are already in line with the climate agreement
At the Institute for Sustainable Process Technology we are happy to see that the technologies that we develop with our partners have found their way into the climate agreement. At the same time, we are staying ahead of developments by setting up new programs and initiatives. The ISPT network will play an important role in the realization of the Mission-driven Innovation Programs.
With robust programs on heat and heat integration (including drying and distillation techniques), a growing program on circularity and an already very large program on hydrogen production and circular carbon, the activities of ISPT are broadly relevant for industry. In addition to the more research-driven programs, we also increasingly support the exchange of knowledge and experience between companies, for example with learning communities such as the heat platform.
Because of the changing technologies that are needed to make the transition, for example the electrification of processes and industry 4.0, companies also have a very steep learning curve in order to include staff in these changes. In the ISPT Innovation Academy, we are responding to this rapidly increasing demand together with the universities. In this way we help to support the social acceptance that is imperative within companies.