Calculation of environmental and financial effects of climate and energy measures

Berekening milieu- en financiële effecten van klimaat- en energiemaatregelen

This assignment was part of the coalition formation report 2025: Routes to Realization; Choices for Climate and Energy. It was commissioned by an interdepartmental working group consisting of the ministries of Finance (FIN), Climate and Green Growth (KGG), Agriculture, Fisheries, Food Security and Nature (LVVN), Infrastructure and Water Management (I&W), Education, Culture and Science (OCW), Housing and Spatial Planning (VRO), Health, Welfare and Sport (VWS), Social Affairs and Employment (SZW), Economic Affairs (EZ), and General Affairs (AZ), with the Netherlands Bureau for Economic Policy Analysis (CPB) and the Netherlands Environmental Assessment Agency (PBL) as knowledge partners, chaired by Erik Jan van Kempen, ABDTOPConsult.

Why calculate the effects of climate and energy policy packages?

The Netherlands faces a challenge in achieving its climate objectives. According to PBL, current policies are insufficient to meet the 2030 climate targets, while ambitions for 2040 are considerably more stringent. The Ministry of Climate and Green Growth therefore commissioned an assessment of the effects of various policy packages on greenhouse gas emissions and the financial implications for citizens, businesses, and government. At the request of an interdepartmental working group, Kalavasta used the Energy Transition Model (ETM) and additional models to calculate four packages ranging from budget-neutral options following European ambitions to packages incorporating additional investments aimed at achieving 90% national emission reduction by 2040. This integrated approach ensures that interactions between sectors and measures are explicitly accounted for, rather than simply aggregating individual effects.

What are the key findings regarding emission reduction?

The four packages demonstrate notable differences in outcomes. The A packages, which represent the least intensive intervention, target the Dutch ESR objective for non-ETS1 sectors and largely follow the baseline scenario trajectory, albeit with emissions several megatons lower in 2040. The A+ package is expected to achieve the 2040 ESR-target with high probability, while the A package may achieve it. The B packages pursue a more ambitious objective of 90% emission reduction relative to 1990 levels in 2040. Package B+ approaches this target, supported in part by substantial expansion of offshore wind capacity to 40 GW and conversion of coal-fired power stations to biomass facilities equipped with CO₂ capture technology. The most significant distinction between the A and B packages concerns industrial policy: whereas the A packages lack the national CO₂ levy, the B packages strengthen this instrument by 2040.

What are the financial implications of the packages?

From a governmental perspective, the A and B packages are designed to be budget-neutral. The plus packages require additional government expenditure of approximately 6 billion euros annually, though this investment yields reduced costs for households and businesses. In the absence of subsidies (packages A and B), annual household expenditure increases by approximately 2 billion euros per year. With subsidies in place, this increase remains below 1 billion euros. For businesses, all packages result in comparable aggregate costs by 2040, although the B packages generate a temporary cost increase of approximately 2 billion euros annually in 2035. However, it should be noted that these aggregate figures obscure considerable variation at the individual level. Households continuing to rely on gas heating face additional annual costs of several hundred euros under the B packages, whereas those who have already transitioned to sustainable alternatives benefit from reduced electricity taxation.

What are the implications of the study?

The analysis demonstrates that all packages contribute to emission reduction, however the amount of emission reduction and cost distribution implications vary greatly between packages. The B packages achieve the greatest emission reduction but also present the highest carbon leakage risk within the industrial sector. Without adequate compensation mechanisms or the capacity to pass costs through to customers, industrial relocation becomes more probable than decarbonisation for certain sectors. The plus packages mitigate the financial burden on citizens and businesses through subsidies, potentially strengthening public acceptance of the transition. The findings offer an evidence base for the policy choices that will shape the Netherlands' path to climate neutrality.