New Dutch govt vows radical changes in energy policy [Gas in Transition]

Following the November elections in the Netherlands, which ended up with a massive swing to the right, a new right-wing coalition government was formed in May. It includes the Dutch conservative parties PVV, VVD and NSC, but also the farmer-citizen movement BBB, and has vowed to bring radical changes to the country’s energy policies and scale back climate ambitions. PVV, led by Geert Wilders, won most seats in the Dutch parliament, but has moderated its more extreme views in order to gain the cooperation of the other parties in forming a government. 

The four parties agreed a coalition Pact, entitled Hope, Courage and Pride, that underpins the new government’s programme and policy plans over the next four years, promising to take “people's concerns seriously.” Central to these are energy security and climate adaptation, toning down of Netherlands’ green agenda and, goaded by the farmers, confronting the EU and its green policies. 

In addition, the Pact states that the government will “do as much as possible” to stick to any international climate goals the country had already agreed to, but it would not add any extra national requirements on top of them. It repeatedly stresses “No new national ambition on top of European regulations,” and questions compatibility with EU policies. The Pact also puts emphasis on less regulation, lower corporate taxes and lower subsidies. 

Even though the coalition is not explicitly anti-European, the language of the Pact is critical and places priority on domestic ambition over EU policies. This could make the Dutch position within the EU challenging, likely contributing to “slowing down European decision-making.”

Tongue in cheek, Euractiv summed up the coalition’s goals as: Less migration, more manure.

One of the coalition’s first decisions was to swiftly change the country's energy and climate policy. Announced measures include: 

• Reversal of planned increases in taxes on natural gas

• Lowering of other energy taxes on households

• Cutting of subsidies for generating green energy by €1bn/year

• Stopping of all subsidies for electric vehicles (EV) in 2025

• Reversal of the increased CO₂ levy for industry, announced by the previous government

• Stopping subsidies for bioenergy combined with CO₂ capture and storage (BECCS) and biomass power stations as soon as possible

• Removal of the obligation to install heat pumps when replacing heating boilers from 2026 onwards 

• Abolition of the netting arrangement (net metering) for solar panel consumers, with effect from 2027

• Retention of the plans to shut down all coal-fired power stations by 2030

• Retention of plans to expand offshore wind, but onshore wind will no longer be a priority

• Increased investment in nuclear power 

• Introduction of a circular plastics levy by 2028

The coalition has also agreed that low-carbon hydrogen made from natural gas, with carbon capture and storage (CCS), can be used as a "transitional step" towards reducing emissions "if necessary.”

Overall, the Pact signals a break from the past in the way the coalition plans to manage the country’s energy, climate and economic future and its stance within the EU.

Energy security

The new government has made security of energy supply key to its policy. Following the problems the country faced after losing access to Russian gas, as a result of the Ukraine war, it wants to reduce dependence of its energy supplies on what it calls “unreliable countries.” This also underpins energy transition. The Pact states: “The energy transition must be aimed at reducing existing and preventing new dependencies,” with the focus on “greater energy independence and own sustainable energy production.”

It intends to achieve this by expanding offshore gas exploration and production in the North Sea. But it does not intend to reverse previous decisions regarding the Groningen gas-field – it will remain shut.

The coalition will also support plans to extend the life of the existing Borssele nuclear plant beyond 2033 and, in addition to the two new nuclear power plants announced by the previous government, it commits to build two more, including the possibility “for several small reactors” in public-private partnerships. Demonstrating its commitment to energy security, the new government will more than triple the funds allocated to the nuclear programme to about €14bn to 2035. It also places priority on resolving grid congestion, “with the government in charge.”

However, implementation of these plans will be challenging, with many hurdles having to be overcome, especially in terms of feasibility and costs of building new nuclear plants.

In order to ensure security of gas supplies, the new government will support entering into long-term gas supply contracts and increasing gas storage. The Pact states “long-term contracts will be concluded for gas and reserves will be created for gas and critical raw materials.”

Climate change

Even though the coalition plans to stick to already-agreed international and European climate rules, it does not make any commitments to achieve them, or even how, but plans to challenge them. It scaled the target for reduction of greenhouse gas emissions back to the EU level of 55% by 2030 compared to 1990 – this is less ambitious than the 58% target set by the previous government. It will develop alternative policies only if these targets are not reached, which is now very likely.

On the contrary, it plans to relax domestic climate policies by lowering energy taxes, ending the Dutch carbon tax add-on to the EU ETS and lowering subsidies for EVs and solar panels. It has also made it clear that it is up to member states how they implement European directives, with the implied intention that priority will be given to national interests. 

Most of the country’s electricity is now generated from low-carbon fuels, with only 49% from fossil fuels in 2023, down 12% from 2022. Five years earlier, the fossil fuel share was almost 80% – a massive change, but, as a result of the coalition’s new policies, this transition may now slow down.

Where the clash with Europe is likely to come to a head, is during the discussions to approve a new climate target for 2040. The European Commission (EC) is proposing a 90% cut in emissions that, if approved, will involve transformation in areas such as housing and transport, with a direct impact on everyday lives. Three of the coalition parties, PVV, BBB and NSC have already spoken against an ambitious target and are unlikely to support EC’s recommendation. 

The Pact shifts emphasis to climate adaptation, with little or vague reference to reducing emissions. To that extent, it plans to divert financial resources for climate “to help people with a low or middle income and entrepreneurs in the energy transition.” 

It includes structural cuts in research and innovation as well as in civil service that “may reduce rather than strengthen the technological competitiveness of companies and government capabilities.”

An example is the announcement the country’s climate change fund will be reduced by €1.2bn over the next four years, to be achieved through cuts in spending earmarked for the development of green hydrogen and batteries.

It also puts farmers' interests above environmental action, by relaxing farming-related environmental regulations. Farmers will not be forced to reduce livestock numbers or sell farms, as previously planned in order to cut back nitrogen oxide emissions, and will get cheaper diesel. Moreover, the Netherlands intends to renegotiate EU obligations on such emissions, and, in general, EU environmental regulations for farmers – especially EU’s nitrate directive. In addition, the new government will no longer pursue a more ambitious strategy to improve nature than the rest of Europe.

Under the previous government, the Netherlands became one of Europe's leading countries on climate ambition. The new government appears to be putting a stop to that. Some of the changes it plans to adopt will make achieving 2030 targets and net-zero by 2050 difficult, if not unlikely.

Given the coalition’s plans, most of the 2030 sectoral emission targets will now be missed, especially those for agriculture, the built-environment and land use.

However, what the Pact does not show is how the new government plans to meet its climate commitments and still comply with Dutch or European law or the Paris Agreement. 

Challenges ahead

Some of the coalition’s climate policy changes are unlikely to be in compliance with EU regulation, making implementation a challenge. In addition, existing EU climate regulations and the courts are likely to keep the Netherlands in check. However, if, as a result, key domestic ambitions cannot be met under European law, it will lead to further tension between the new government and the EC.

The risk is that the Netherlands could end-up being added “to the list of countries whose support for increased European collaboration can no longer be relied upon,” at least on some issues.

With concerns mounting that the costs of energy transition are proving much higher than anticipated just a few years ago – Barclays estimates these to be between $100-300 trillion between now and 2050 – and with the Green Deal having passed its “glory days” and under sustained attack, many believe that it is time for a strategic rethink and readjustments. Resistance to green policies is now growing across Europe, especially in France, Germany and Italy. In such an environment some of the coalition’s plans may not be considered to be totally out of place – even within Europe.

Nevertheless, “the Netherlands’ reputation of being one of the more cooperative EU member states may well become a thing of the past,” with policy challenges expected in migration, climate and agriculture.