Cabinet commits to four lines for making industry more sustainable

The cabinet is committed to making industry more sustainable. For instance, the cabinet has tightened the CO2 tax and is introducing a minimum CO2 price for industry. Existing subsidies for making industry and small and medium-sized enterprises (SMEs) more sustainable will also be revamped. In addition, the government wants to make binding tailor-made agreements with the 20 largest industrial emitters of greenhouse gases.

The Netherlands has big climate ambitions. This also affects the sustainability of industry. This sustainability has become even more important due to the corona crisis and the war in Ukraine. For instance, disruptions in the supply of energy, raw materials and products can make industry vulnerable. The government therefore wants to reduce dependence on foreign countries in terms of energy supply. For this, industry needs to emit over 20 megatonnes of CO2 per year less, with a target of 60% less emissions than in 1990. That is 5 to 5.9 megatons more than was agreed in the Climate Agreement.

For this sustainability, the cabinet is committed to four lines. For instance, the cabinet wants to ensure the intended CO2 reduction by standardising and pricing. The plans include a tightening of the CO2 tax and the introduction of a minimum CO2 price. The CO2 tax for industry was developed to create certainty about the realisation of the desired CO2 reduction. In a parliamentary letter, Minister of Economic Affairs and Climate Micky Adriaansens writes that the levy will "provide industry with a consistent price incentive for sustainability and forms a predictable basis for planning sustainability investments. Of the planned 5 to 5.9 Mtonnes per year of additional CO2 reduction, 4 Mtonnes per year is secured through the CO2 levy.

The Coalition Agreement also agreed to introduce a minimum CO2 price for industry. Like for electricity generation, this price does not aim to generate revenue for the State. It should give a stable price signal to companies that they can take into account in their investments. The government is investigating whether there is support among other EU member states for introducing such a minimum price. The tightened CO2 tax and the CO2 minimum price are currently being
worked out.

Adjustment Energy Tax and Renewable Energy and Climate Transition Storage
The government wants to encourage companies to reduce their natural gas consumption. And switch to sustainable electricity for their energy supply. To this end, the Coalition Agreement announced adjustments to the Energy Tax (EB) and the Storage of Sustainable Energy and Climate Transition (ODE). For instance, the government is increasing the EB on natural gas for larger consumers, while lowering the ODE on electricity. With this, the cabinet wants to realise a sustainability incentive. The cabinet is currently working out these adjustments.

The exemption and refund scheme in the energy tax for natural gas and electricity for metallurgical and mineralogical processes ends on 1 January 2025 . This will give these sectors additional incentives to save energy, Minister Adriaansens says. With these measures, the minister aims to bring energy taxation more in line with the proposals from the EU Fit-For-55 package.

Finally, the cabinet is tightening the energy-saving obligation. This obliges companies to implement energy savings with a payback period of less than five years. The government will extend the energy-saving obligation to ETS and mandatory permit companies in 2023. The Recognised Measures List will also be revamped. This should make it clear to companies which measures are mandatory for them. Additional resources will also be deployed for testing and enforcement.

The government also wants to support and facilitate companies that want to become more sustainable. For instance, the government wants to ensure that sustainability happens here and emissions and activity do not 'leak' abroad. To this end, the government is investing in subsidies for sustainability and innovation. It also focuses on making renewable energy and the infrastructure required for it available in time.

Various schemes are available to stimulate sustainability. These include the Stimulation of Sustainable Energy Production and Climate Transition (SDE++), the Demonstration of Energy and Climate Innovation (DEI+), the Accelerated Climate Investment and Industry (VEKI), the Top Sector Energy Studies (TSE), Energy Investment Allowance (EIA), Environmental Investment Allowance (MIA) and Voluntary Depreciation of Environmental Investments (VAMIL). The government is further optimising these schemes for, among other things, circular economic investments that contribute to CO2 reduction.

Specifically:

Minister Adriaansens also points to the National Investment Scheme for Climate Projects Industry (NIKI), which complements the SDE++. "The NIKI scheme will support larger-scale sustainable investments, in which these technologies are applied, with a subsidy for the start-up years. We are currently working on (draft) legal texts, informal consultation with industrial parties and the notification process in Brussels, after which the scheme can be submitted to your Parliament for approval. The planning is that the NIKI can be published in the first quarter of 2023, after which a first opening can take place," the minister writes in a parliamentary letter.

The government is also strengthening its leadership on sustainable infrastructure and accelerating the implementation of this infrastructure. The government is coordinating infrastructure projects of national importance through the Multi-Annual Programme for Infrastructure and Climate (MIEK). The MIEK project overview was presented to the House of Representatives in November. However, this overview reveals a gap across the full range of projects between the desired completion dates of the industrial clusters and the provisional commissioning dates planned by network operators. Factors such as the duration of procedures, nitrogen emissions and sufficient implementation capacity are hindering rapid completion. The government aims to remove these obstacles. The Sustainable Industry Infrastructure Programme (PIDI) is also working with industry, network operators, energy producers and local and regional authorities to explore ways of bringing the industry’s desired completion dates and the planned commissioning dates for infrastructure closer together.

The cabinet is also pushing for tailor-made agreements with large emitters and making SMEs more sustainable. The 20 largest emitters accounted for 33.2 Mtonnes of the total industrial greenhouse gas emissions of 54.6 Mtonnes in 2019. They also caused 9.7 Mtonne of direct emissions, reported under the energy sector. Minister Adriaansens wants to work with this group to shape fundamentally new sustainable technologies. And agree on a programme for faster and more ambitious CO2 reductions. The focus here is on customisation, with which the minister wants to maximise the CO2 reduction potential and minimise the impact on the living environment.

The minister wants to make binding agreements with the 20 largest emitters to realise additional CO2 reductions. Minister Adriaansens will also make agreements on long-term sustainability plans for climate-neutral and circular production, as well as projects that can lead to large-scale technology breakthroughs.

"In tailor-made agreements, reciprocity is the starting point. For the government
this means that we are willing to make agreements on support to
realise financing, accelerate critical infrastructure, facilitate fast and efficient licensing, remove unnecessary barriers in laws and regulations and support markets for new sustainable energy carriers, raw materials and circular products. In doing so, we take into account the cohesion of companies in industry clusters," the minister writes.

Efforts are also being made to make SMEs more sustainable. For this, the cabinet wants to support SMEs in the climate and energy transition. "In addition to CO2 reductions through measures under the aforementioned energy-saving obligation, industrial SMEs can realise significant CO2 reductions with more drastic adjustments to production processes that have a payback period of more than five years," the minister writes in the parliamentary letter.

However, this requires various preconditions. These include access to infrastructure, affordable sustainable energy and financing, laws and regulations, R&D support and availability of skilled personnel. By focusing on creating these preconditions, Minister Adriaansens wants to support SMEs in becoming more sustainable.

Finally, the cabinet wants to stimulate the circular economy. The Coalition Agreement includes an ambitious climate target for the circular economy and the realisation of a corresponding implementation programme. The minister calls using fewer new raw materials and reusing raw materials as well as replacing fossil raw materials with renewable raw materials essential for industrial sustainability and reducing CO2 reduction in the Netherlands.

Within this incentive policy, there is room for circular investments that lead to CO2 reduction. The implementation programme includes improvements to subsidy schemes for large-scale circular projects. The government is also working on a policy package with normative, pricing and incentive measures.

More information is available in the parliamentary letter Minister Adriaansens sent to the House of Representatives. The parliamentary letter is available here.

Author: Wouter Hoeffnagel
Photo: jarmoluk via Pixabay