The mating dance between heavy industry and the cabinet has now been going on for two years. Rutte IV came up with a dare. It wanted to make one-on-one agreements with large industrial companies about making their fossil energy-consuming factories greener. Think: steel factory Tata, oil company Shell, fertilizer manufacturer Yara, plastic manufacturer Dow. Major emitters of greenhouse gases.
In exchange for this greening, the companies would receive help: subsidy or, for example, thick power cables and hydrogen pipes to the factory gate. It could cost three billion euros. Slogan: better green here than gray elsewhere.
Germany, France and the US are now handing out billions of euros to companies. Industrial policy is hot. The European Union, the US and China each want to become leaders in new green technology, such as batteries and electric cars.
In the Netherlands it remains quiet around one-on-one deals. One company, chlorine manufacturer Nobian, seems close to an agreement on a 200 million euro subsidy. Other major emitters have only signed a declaration of intent.
What’s the problem? Closing a major deal with a resigning cabinet is difficult for companies, is heard in The Hague and in the industry. In the meantime, heavy industry is complaining a lot. Taxes are said to be higher here than elsewhere in Europe. It is difficult to say to what extent this is true.
And Rutte IV is struggling with the new industrial policy. These designs are therefore extremely complicated. The key question: where does rational policy end and the tear-jerking corporate lobbying story begin?
It is widely recognized, including by economists, that government help is needed for greening. A tax on greenhouse gas emissions alone will not get you there. Without subsidies, there will be no market for green steel or recycled plastic. The government must help companies overcome a hurdle, because society benefits from the learning curve that then arises, which makes green products cheaper.
“New green technologies require major investments. But after that, a huge reduction in costs is on the horizon,” says Rick van der Ploeg, professor of environmental economics (UvA and Oxford). “Every time you switch a neighborhood to heat pumps, installation and production becomes cheaper. It was the same with solar and wind energy.”
This cost reduction is also expected in the production of green hydrogen, with which chemical companies can replace fossil raw materials. “But no company wants to be the first. After all, the benefits of this cost reduction are not for companies, but for society. Governments must realize that development race, as they did with vaccines during the corona crisis.”
It is important that it is immediately established that the support is temporary, so that taxpayers’ money is not wasted by, for example, supporting non-viable companies for too long.
Also read: Companies complain a lot about the business climate. Is it really that bad?
It is difficult to put a finger on what exactly works, concludes economist Dani Rodrik in the Financial Times. As far as he is concerned, the best recipe is: one: don’t pursue too many goals. So not creating jobs and reducing emissions and increasing innovation. (Politicians are bad at this.) Two: the government needs to work closely with companies, constantly exchanging information to discover what works. Three: the discipline to stop when it’s not working. “Successful industrial politics is not about picking winners but about letting losers go.” (Politicians are bad at this too.)
So far, the government has avoided discussing which companies are not viable. That’s crazy, because some of them will disappear because we no longer need their products, says Bettina Kampman of CE Delft, which investigated the future of the industry. “The more electric cars, the fewer gasoline and oil refineries are needed.” There are now five refineries in the Netherlands, all of which may receive support.
Industrial policy is extra difficult here because the Netherlands is exactly on the fault line of a global realignment of energy and industry. “The Netherlands was an island of cheap energy because of Groningen gas,” says Kampman. This attracted energy guzzlers. “Now energy will be cheaper elsewhere.”
Renewable energy such as sun and wind is much cheaper near where it is generated, says Luc Soete, professor emeritus in Maastricht. “Transporting solar and wind energy is more expensive than transporting oil. Energy-intensive industry is therefore moving to where energy is generated cheaply.” For example, to countries where the sun always shines and the wind always blows. Kampman also thinks that the energy-consuming parts of the production process for making steel and fertilizer will not remain in the Netherlands. The rest possibly.
Within Europe, the Netherlands does have a new advantage: offshore wind. Soete thinks that industry located on the coast is cheaper than industry in Limburg (Chemelot) and the Ruhr area. “The Dutch and German governments are committed to building energy infrastructure in those regions, but the costs are enormous. The real question is whether it is worth it.”
The Netherlands can want anything, but it is in the middle of major international forces. Even with government support, a significant part of the industry can disappear from the Netherlands. All the more reason for a new cabinet to carefully choose which companies will and will not be helped with tax euros.
Marike Stellinga ([email protected]) is editor of NRC and looks at developments in politics and society through an economic lens.
A version of this article also appeared in the March 9, 2024 newspaper.