Wopke Hoekstra is seeking rapprochement now that concerns about energy bills are growing

European Commissioner Wopke Hoekstra faces an extremely difficult task. In more than a year, most Dutch and European households are guaranteed a significant increase in their energy prices. Hoekstra will want to dispel the growing political concerns among European governments about this when he meets with ministers from all EU countries in Luxembourg on Tuesday. But he will not want to risk the entire EU climate policy.

Difficult, because the impending rise in energy prices is a direct consequence of European climate policy. From 2027, the European Union will tax the climate damage suffered by citizens and companies by putting a price tag on emissions. Anyone who has a petrol car and a gas connection will spend several hundred euros extra per year on energy costs.

Within the European Commission, Wopke Hoekstra is the man who must keep Europe on the path to the climate goals. The introduction of this climate tax fits in seamlessly with this: the intention is that entrepreneurs and consumers are stimulated by rising prices to make their lives more sustainable.

But now that politicians across Europe are confronted with resistance to drastic climate policy from their supporters, a large number of governments are sweating. They are terrified that they will no longer be able to sell this tax, which will increase the energy costs of an average household by several hundred euros, to their voters.

Governments fear that they will not be able to sell the climate tax to their voters

Hoekstra will partly accommodate them with a number of commitments and proposals that should limit the risk of unexpected price increases. The sharp edges come off. But his room for maneuver is limited: few plans are seen as so essential for the success of European climate policy. “Adjustments are okay, but dropping or postponing this program would be Pandora’s Box,” said a diplomat. “Where does it end with climate policy?”

Auction

Since 2005, heavy industry in Europe has had to pay for its emissions. The EU set up a special auction where emissions can be purchased per ton of CO2. You are not allowed to emit what you have not purchased. Because the EU is reducing supply every year, purchasing emissions is becoming increasingly expensive. With effect: industrial emissions have fallen sharply in recent years.

This was called ETS. Under the name ETS2, the EU will also apply the same system to citizens and entrepreneurs from 2027. They do not have to go to the auction themselves to buy off their energy consumption, suppliers such as oil companies and gas companies do that. They pass the costs on to their customers. With part of the proceeds from the auction – an amount of more than 86 billion euros – the EU countries can once again help their citizens to become more sustainable.

This does not alter the fact that many families will see their energy bills rise significantly. A study by Rabobank estimated the costs for a Dutch family with a house running on natural gas and a petrol car earlier this year at 187 euros, with a diesel car that is more than 200 euros. According to ABN Amro, this amounts to 319 to 489 euros if indirect costs are also included, assuming that the bakery and the pub pass on their higher energy prices.

The energy bill, politicians know, is political dynamite. The energy crisis that followed the Russian invasion of Ukraine in 2022 has reminded them of this. Governments across Europe intervened by partly covering energy costs, often for the entire population. This time that is not the case. Preparations are being made, also in The Hague, to compensate poorer citizens. This is also possible with part of the proceeds.

But the complicated thing is: the pain of high prices is also partly the goal. Otherwise, the desired behavioral change will not occur. When Henri Bontenbal (CDA), as a member of the House of Representatives, proposed last year that the Dutch cabinet would fully compensate for the introduction by reducing the energy tax, climate minister Hermans (VVD) responded that such a reduction would “nullify the impact of ETS2 on emission reduction in the Netherlands.” [zou] doing”.

Yellow vests

There is an additional problem for the Netherlands. The government recently extended the excise duty reduction again, which was introduced as a temporary measure during the energy crisis. This measure, which will cost the treasury 1.6 billion euros next year, will expire at the end of next year. If the government simultaneously introduces ETS2 and says goodbye to the lower excise duty, petrol will immediately become 36 cents per liter more expensive from 2027.

These concerns have become increasingly louder in recent months, not only in the Netherlands, but also elsewhere. Politicians warn of ‘new yellow vests’, diplomats from various countries point to Poland and France, where elections will take place in the year of introduction. “2027 is suddenly very close,” says one of these concerned diplomats.

This summer, a large group of countries reported their concerns to the European Commission, not insisting on cancellation but on revising the plans. It will be announced on Tuesday exactly how Hoekstra plans to meet them, but most of the contours were already visible in a letter sent by Commission President Ursula von der Leyen on Monday.

The Commission wants, among other things, to highlight the billions in revenue from the auction, so that countries can get started more quickly with their sustainability subsidies. Hoekstra will also seek support for a plan to build in buffers, with which the EU can adjust the price as an auctioneer. If the emissions increase too much, the Commission can put additional emission allowances on the market to stabilize prices. Hoekstra seems to want to take advantage of that. This way, extreme price increases are avoided – but the system remains intact.

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