Budget day and climate change | ER&I | Deloitte Netherlands

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Budget day and climate change

Overview of the developments and measures

Every third Tuesday of September, the Dutch government presents the budget for the coming year. Climate change is an important topic in the budget for 2020 and after.

A number of issues influence the budget:

  • Earthquakes in the North of the Netherlands due to the extraction of natural gas, forcing the government to reduce the production.
  • The recent climate agreement that was signed in the Netherlands focusing on reducing the greenhouse gas emissions with 49% by 2030 compared to the emissions in 1990.
  • A lawsuit instigated by NGO Urgenda, forcing government to reduce the greenhouse gas emissions up to 25% by the end of 2020 compared to the emissions in 1990.  

In light of these developments, the government announced the following measures. 

Climate change mitigation

Due to the increasing cases of extreme weather, climate change adaptation has become an important topic. Cities have to deal with instances of extreme rainfall on the one hand and on the other hand, dry periods causing low water in waterways. To counter these effects, government introduced measures to improve rainwater collection systems. Additionally, millions have been set aside for deepening the Waal river to ensure the accessibility throughout the year.

Innovation stimulation

Between 2020 and 2030 government will spend approximately 300 million per year to reduce greenhouse gas emissions. In total 60 million EUR is set aside for innovation, pilots and greenhouse gas emissions reducing technology:

  • 10 million EUR for hydrogen projects
  • 15 million EUR for Carbon Capture, Utilization and Storage
  • 30 million EUR for rapid execution of  greenhouse gas emissions reductions
  • 5 million EUR for the circular economy 

In addition, the government is investing 35 million in innovation at electricity companies. Furthermore, the government wants to change the energy regulations to make it easier to generate and store energy.

The role of hydrogen in the Netherlands

Especially the investment in hydrogen production could play an important role. Hydrogen gas is viewed as a promise for the low carbon economy since it can be utilized for different purposes. Hydrogen can play an important system role to capture abundant energy. It can be used as a emissions free fuel in cities, as a raw material in many chemical industries and as a source of high temperature heat. Nevertheless, large (government) incentives are needed to role out hydrogen production and usage in the Dutch economy and minister Wiebes has announced that green hydrogen will not be subsidized in the most important stimulation device, the SDE++. This somewhat ambivalent policy can slow down or even eliminate initiatives of large and diverse groups of stakeholders in the Netherlands who want the Netherlands to play a leading role in the world regarding the production and utilization of hydrogen as an enabler of the worldwide energy transition. 

Rapid greenhouse gas emissions reductions

To meet the target set by a court of law regarding the lawsuit of Urgenda, the government made an additional 26 million EUR available for proven technologies that reduce greenhouse gas emissions in the industry and waste sector. These measures are especially interesting for investments in the industry that otherwise would not take place or would take place at a later stage. The incentive makes it attractive for the industry to make relatively low risk investments which in turn increase their competitiveness in the future due to lower energy costs or more efficient processes. These measures therefore offer a lot of potential in the industry.

Circular economy

In 2050, the Dutch economy has to be completely circular. This means that materials can be reused and that we move from a make-take-waste economy to an economy where all materials are designed in a way that they can endlessly be reused as a raw material for new products. The goal for 2030 is that 50% of used materials can be reused. Therefore, the government has a budget of 80 million EUR available in 2020 to stimulate circular projects. An important prerequisite of the circular projects is that they also lead to greenhouse gas emission reductions.

With China and other countries in the Far East no longer accepting Europe’s waste however, the author expects more pressure on recycling processes to deal with low value streams of product, while initiatives to reclaim valuable and/or rare metals from streams such as e-waste fall short because of lack of equity and effective government stimulation. These waste streams, containing large amounts of gold, silver and rare earth elements that are crucial to the ‘Green Economy’ are exported by companies like Mitsubishi, to be processed in Japan where natural resources are scarce. Europe, and the Netherlands in particular, should take notice, otherwise our waste problem will stay just that.

What needs to happen?

In line with the recent climate agreement the government will invest in innovation in order to reduce the greenhouse gas emissions and the impact of climate change on our economy. The budgets for innovations combined with the budgets for rapid reductions of greenhouse gas emissions, make it possible for Dutch companies to take a leading role in low carbon technology and production. Nevertheless, a lack consistency and clear choices in policy cause promising initiatives with regards to the hydrogen economy to decline and make it hard for companies to decide on their investments.

A complex topic needs a strong government making long term decisions which reduce emissions in the short, medium and long term. The climate agreement ensures a focus on the medium and long term but policies are not always tailored towards these goals and seem sometimes opinionated. Larger short term spending could lead to a better positioning of the Dutch economy as a frontrunner in the fight against climate change. It is also the only way to kickstart innovation that will end up ‘paying back’ at least some of the investment in the ‘Green Economy’.

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