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The Dutch chemical sector is facing a major transition. How can we ensure that the production of plastics and other carbon products is both circular and competitive by 2050? In its report Van Keten naar Kringloop (From Chain to Cycle), Invest-NL outlines the possible technological routes, the choices involved, and the policy requirements.
Carbon is needed for products such as plastics, building materials, and high-quality materials. Currently, that carbon mainly comes from oil and gas. If the Netherlands wants to be climate neutral by 2050, that fossil carbon must be gradually replaced by recycled streams, bio-based raw materials, and carbon from CO2.
On behalf of Invest-NL, EqoLibrium investigated which routes are most promising and what role Invest-NL can play in this. The scenario analysis helps to make targeted investment choices and to discuss the necessary preconditions with the government, industry, and other financiers.
https://www.invest-nl.nl/nl/nieuws/van-keten-naar-kringloop-zo-maken-we-koolstofchemie-circulair
In order to comply with the agreements in the climate agreement, significant steps must be taken in the Netherlands to reduce CO2 emissions. The use of fossil fuels will be replaced as much as possible by sustainable alternatives such as renewable energy from wind and solar power. The energy transition requires a fundamentally different energy system than the current one, which is insufficiently prepared for the growing demand for energy.
The Province of Zeeland is working with network operators and municipalities to draw up the Provincial Multi-Year Infrastructure, Energy, and Climate Program (PMIEK). The PMIEK 2.0 includes various research and exploratory projects. One of the research projects concerns the municipality of Sluis. Sluis has a unique profile because the tourism sector has a major impact on energy consumption. In addition to regular demand from households and businesses, tourism causes sharp peaks in consumption, particularly in the summer and during holiday periods.
At the same time, the landscape around Sluis is a major tourist attraction, which causes exceptionally high peaks in energy demand and consumption at certain times of the year. This combination—a large and expansive rural area, a limited population density, and strong seasonal peaks—means that both demand patterns and spatial conditions play an important role in the design and construction of the future energy system.
This study provides insight into how the energy system in the municipality of Sluis can be organized in the future. Based on model calculations, various scenarios for the development of the energy system are compared. The scenarios show how choices regarding sustainable generation, heat pumps, and grid integration affect costs, emissions, and grid load.
Lessons from the study
Based on the model calculations, this study provided the grid operator, the province of Zeeland, and the municipality of Sluis with insight into the bottlenecks in terms of potential grid congestion in a municipality that wants to continue to grow and has specific characteristics in terms of energy demand and supply and location.
The anticipated problems surrounding the timing of the expansion of the Oostburg station contributed to Stedin's decision to bring forward the expansion of this station by several years. The study also showed that there are various no-regret options for making the energy mix more sustainable in order to:
a) reduceCO2 emissions in order to achieve the climate targets set, and
b) that are most favorable in terms of cost.
It is often said that "to measure is to know." This study shows that this is true. By understanding the transition and calculating the possible scenarios on the table, network operators and policymakers can make the choices that are most beneficial. Beneficial for residents and for businesses.
Another aspect is that this study has really brought parties together. Various parties, such as the network operator, the province, the municipality, and local entrepreneurs, were of course already in frequent contact with each other. Nevertheless, a study such as this helps to provide insight into and reflect on topics that have a common denominator and that everyone considers important. It usually turns out that if you are aware of each other's interests and concerns and are open about them, various goals can be achieved and it becomes clear who should do what and when.
The energy transition in the Netherlands is causing a sharp increase in both the demand for and supply of electricity. As a result, grid congestion is a growing problem: it occurs when the transmission capacity of the electricity grid at a given location is insufficient to meet the demand for, or supply of, electricity. This leads to bottlenecks in business parks, among other places. Companies want to expand their operations in vain, sustainable projects are delayed and other companies want to establish themselves in a new location.
Grid expansion is the most effective solution to this problem, but grid expansions take years to realize. Current policies to address grid congestion have only marginal effect for now. At the same time, significant social costs arise from grid congestion because sustainability or business expansion cannot take place. Therefore, other solutions are necessary to counteract the negative effects of grid congestion.
Generation of local renewable energy can provide relief
One possible solution to this is more local generation of renewable energy. Indeed, local energy generation on business parks, often in combination with battery storage or other methods that provide flexibility, can help alleviate grid congestion. In addition, this often requires reducing the peak demand of the business park. This either creates more relative grid space for own use, or can reduce the total required grid capacity in favor of other users. Business parks are ideally suited for this purpose because of their economies of scale and the coherence of different types of businesses, and thus different types of energy demand.
This report therefore examines the extent to which local generation of electricity from solar and wind on business parks offers a solution to congestion problems. To illustrate this, the impact of local generation for two types of business parks is analyzed through a model calculation. For both business parks, two scenarios of renewable generation (one with and one without wind energy) are compared to the business as usual scenario. The scenario in which a combination of solar and wind is possible is referred to as Optimum. Finally, the scenario without wind is referred to as No Wind. The distinction between the two types of business parks allows for a broader interpretation of results. The different business parks concern hypothetical situations, based on real data. This makes these business parks exemplary of many cases around the country.
TenneT's security of supply report (May 2024) warns of potential problems with the security of electricity supply in the Netherlands in 2033. This is due to a combination of growing electricity demand and a larger share of solar and wind power in the electricity mix. The decline of controllable generation capacity, such as gas-fired power plants, and the limited supply of other forms of flexibility contribute to this threat. This problem is also visible in other Northwest European countries, which increases the urgency to address this issue.
In the current situation, coal and gas plants are the main controllable power. However, with the ban on coal power starting in 2030, by 2033 the Netherlands will rely on renewable energy, imports from surrounding countries, gas power plants and battery storage to meet demand. About 9 GW of gas power plants are expected to be operational in 2033, down from the current 12.5 GW. There is a risk that the number of available gas power plants will decline more or less simultaneously, which could seriously threaten security of supply.
The TEACOS model used in the report calculated that the Netherlands will need 23 GW of controllable power in 2033, or 37.6 TWh on an annual basis (for 3,798 hours). This means that the Netherlands will depend on imports, gas plants or industrial demand-side management 40% of the time. Interconnection capacity for imports is an important resource at 13.8 GW, but the availability of imports at times of scarcity is not guaranteed due to competition from other countries and geopolitical risks.
Battery capacity is seen as a complementary solution, but can only contribute for short periods and is limited by technical and market uncertainties. The remaining need for controllable power must be met by gas power plants, as the other options do not provide sufficient capacity.
The cost of shutting down or shifting in time industrial production, especially when it becomes mandatory, can be high and negatively impact businesses and households. Capacity mechanisms have been introduced in surrounding countries, where availability is rewarded. This option could also help in the Netherlands to ensure security of supply at lower social costs.
The report recommends the creation of an "insurance premium" for keeping regulable generation capacity available, especially in the form of gas plants, through, for example, a capacity mechanism. This should help prevent the Netherlands from becoming dependent on unreliable imports and the expensive demand-side management option. It is also suggested that security of supply be looked at more broadly, taking into account not only the costs of demand-side management but also the impact on value chains, investments and the affordability of energy for households and businesses.
On December 12, 2015, an international climate treaty was concluded at the Conference of the Parties (COP21) in Paris: the Paris Climate Agreement. With that treaty, 195 countries agreed to limit global warming to well below two degrees Celsius, with efforts aimed at one and a half degrees. Although energy and climate policies were being implemented by many countries even before that, the energy transition gained momentum after the signing of the treaty.
When making climate policies, it is crucial to keep in mind the end goal of these policies - limiting global temperature rise. Indeed, many policies are currently driven by alternative or indirect goals that do not necessarily promote efficiency and effectiveness toward meeting the actual goal. One of the trade-offs that can have a major impact on the level of investment for meeting those goals is the choice of whether to eliminate fossil fuels entirely, or whether to focus primarily on making the energy mix emission-neutral (usually summarized as reducing greenhouse gas emissions, often referred to as CO2 equivalent).
In Europe, climate targets have been set by the European Commission (EC). These targets must be met proportionately by individual member states. Each member state therefore also has national policies that, aided by the frameworks set from Europe, must ensure sufficient and timely reduction of CO2 emissions. The energy transition is therefore also an economic challenge. After all, you are replacing a highly efficient, and therefore cheap, energy mix for another, often less reliable and/or more expensive mix with a higher space requirement. Therefore, the goal is to achieve the transition to an economy with no emissions toward the atmosphere and at the lowest possible cost. How high these costs will be depends on policy choices that may or may not exclude certain technologies.
There is no time for fuss, but...
The Netherlands seems to be in the lead when it comes to setting even more ambitious climate targets than already prescribed by the EC. Looking at cost effectiveness, the question can be asked to what extent it is desirable to be (too) far ahead of the rest of the world. There is also another consideration to be made, namely that of technology choices.
In a recent study, the Netherlands Environmental Assessment Agency (PBL) showed that delaying or ruling out options in advance will make climate neutrality in the Netherlands in 2050 almost or even completely impossible. The luxury of choosing between energy sources and technologies is no longer available, according to PBL. This seems at odds with the recent citizens' initiative introduced by Triodos Bank and a broad group of organizations and companies. On the contrary, this initiative is pushing for an international treaty to completely stop the use of coal, oil and gas. It is true that climate goals can also be achieved by excluding certain technologies or energy sources. But that would be at the expense of the affordability and/or reliability of the energy system. In addition, part of the CO2 emissions will be moved outside Europe. Something that is good for achieving our own goals, but rather counterproductive for combating global climate change - and thus the ultimate goal.
In this report, compiled by Public Affairs Energy Research & Strategy (PZ ERS) and Quo Mare, we compare two scenarios for the transition to an energy system in 2050 that fits within the set goals. We then highlight the differences. Two transformation scenarios are presented: the Net-Zero - or CO2-neutral - scenario and the fossil-free scenario. In the fossil-free scenario, coal, oil and gas will no longer be used at all and only emissions from the agricultural sector need to be offset. In a carbon-neutral society, CO2 emissions from the extraction, transportation, conversion and consumption of these fossil energy sources can be offset with negative emissions, or captured through Carbon Capture and Storage (CCS).
Depending on policy choices, there could be large cost differences between the different scenarios. Scenarios that both result in achieving the ultimate goal: ending greenhouse gas emissions toward the atmosphere by 2050 in order to limit global temperature rise to no more than two degrees Celsius, and as close as possible toward one and a half degrees.
The model calculation underlying this report assumes only direct costs and revenues. Thus, any indirect costs and revenues associated with a particular energy system are left out of this quantitative analysis. If these were to be considered, the annual cost differences between the scenarios would increase even further.
On Wednesday, Feb. 26, the European Commission released its long-awaited Clean Industrial Deal (CID). This policy package responds to the EU's challenges of geopolitical tensions, slow economic growth, and technological competition. Within the CID, policies around affordable energy are identified as a cornerstone. This is shaped in the Action Plan for Affordable Energy (AEA). Specifically, these packages aim to restore European industrial competitiveness.
The CID presents an impressive number of measures that appear substantial on paper, but the real challenge lies in the nuances of implementation. While some packages will be implemented as early as 2025, in reality many measures are merely announcements of initiatives that will not take full effect until 2026 or later. This delay contrasts sharply with the speed at which U.S. subsidies through the Inflation Reduction Act and Chinese support measures are being rolled out.
The fundamental challenge lies in the asymmetric structure of the EU itself: while Brussels provides strategic vision and policy frameworks, financial implementation falls largely to the member states. Although EU cohesion mechanisms somewhat level out existing differences, the core problem remains that many member states are already struggling with tight national budgets. As a result, new EU policy ambitions for which member states must largely pay themselves come up against an unruly financial reality - a problem exacerbated in the current political climate where nationalist sentiment often prevails over European solidarity.
All in all, the CID is a step in the right direction. It is the impetus from the European Commission that must now be kicked in by the national member states. Speed and decisive action in a global context where Europe has to compete with superpowers such as the U.S. and China, remains a major challenge. As long as Europe is unable to improve this, plans such as the CID and the AEA will turn out to be fine ambitions, but will not be able to turn the tide for industrial competitiveness in time.
In order to cash in on the European push, member states must do more than just cherry-pick the financial cherry from the EU-supplied "directives porridge. Restoring European, and therefore national, industrial competitiveness costs money. The alternative, however, is that it will cost us even more money when the same industry leaves for good. The water is already at their lips. Let us now invest quickly and decisively to preserve our industry.
The EU introduced the first-ever greenhouse gas emissions trading system in 2005: the European Union Emission Trading System or EU ETS for short. Accounting for nearly 50% of the EU's total greenhouse gas emissions, it is often referred to as the cornerstone of European climate policy. The EU ETS covers the power sector, heavy industry and continental flights. Heavy industry in turn consists, for example, of companies in the chemical, metal and stone industries.
The EU ETS has now been in operation for almost two decades. In these twenty years, the system has endured a number of profound economic, political and social changes. For example, we faced a global economic crisis in 2008, the Paris Agreement was signed in 2015, after which global climate policy really gained momentum, and we faced a pandemic in 2020. In all that time, the core of the EU ETS remained intact: Emissions are priced and GHG emissions from ETS sectors fall to zero.
An (international) emissions trading system with a decreasing number of emission allowances is one of the most cost-effective ways to reduce emissions. A predetermined decreasing emissions cap provides companies with certainty that emissions across the sector must go to zero. At the same time, participating parties can trade allowances among themselves, creating a price for allowances. That price ensures that emissions are reduced where it is cheapest to do so. Moreover, emission rights are becoming increasingly scarce. This creates upward price pressure from the supply side of the market. Following the example of the EU, other countries and regions in various parts of the world have now set up emissions trading systems for reducing greenhouse gases.
Currently, the policy framework is such that no more allowances will be issued from 2040. So the system has been operating for about 20 years, and under current plans it will serve for at least another 15 years. The system's emissions cap never dropped as much as it is now. Voices are also already emerging in the current debate for a lifetime extension of the emissions trading system beyond 2039. This could eventually create a market for negative emissions.
Over 20 years, the EU ETS has made an indispensable contribution to the energy transition. The system has ensured that the cheapest emission reduction options have taken place. This inherently also means that the necessary more expensive choices for emission reduction have yet to take place. The emissions price is guiding this. A second, stand-alone emissions trading system will come into effect from 2027: ETS-2. This ETS will oversee emissions reductions from the transport sector, the built environment and smaller industry.
This thematic report provides an overview of the historical policy and price developments of the EU ETS. In addition, it provides interpretation on sustainability within the EU ETS and what possible implications there may be for the market. Finally, it provides insight into developments regarding ETS2.
The European Union (EU) has several policies in place to address issues such as meeting climate goals. One of these measures is the pricing of CO2 emissions through the EU Emissions Trading Scheme (EU ETS). This system was established in 2005 to encourage companies to become more sustainable through pricing. It is a measure that has been welcomed by industry and so far appears to be working well.
Because CO2 prices are not universally applied, companies that do fall under such a scheme experience a competitive disadvantage. Therefore, many of the sectors covered by the EU ETS currently still receive free allowances to remain competitive with comparable producers in many non-European countries. Some sectors simply take longer to become sustainable than others. Yet the European Commission (EC) wants to get rid of these free allowances, and with the Carbon Border Adjustment Mechanism (CBAM), has come up with a measure to maintain the level playing field and counter leakage risks.
The CBAM imposes a levy on the cost price of goods, thereby also pricing in emissions released from production outside the EU. This includes several product groups, namely iron and steel, fertilizers, cement, aluminum, electricity and hydrogen. CBAM has been introduced in three phases to replace these free allowances, while phasing them out. As the share of free allowances decreases, the cost of CO2 emissions increases. The CBAM scheme applies to importers of CBAM goods produced outside the EU. As a result, products not produced in the EU are priced for emissions just as much as European goods consumed within the EU.
Where at its base CBAM is a good idea to implement a tariff on goods produced outside the EU, thereby protecting European industry and at the same time extending the positive impact of European climate policy to global climate policy, there are also areas for improvement. For example, CBAM focuses only on imports of commodities covered by the levy into the EU and does not consider exports. It also does not take into account the fact that the cost price calculation for a product produced outside the EU is different from one produced within the EU. Furthermore, it charges a levy on raw materials, but not on products imported that already incorporate these raw materials. We describe these and some other shortcomings in this report.
Finally, we come up with some recommendations that would improve the functioning of the CBAM and keep the actual goal - a level global playing field for European producers as well as encouraging sustainability through pricing - intact.
The Netherlands has long been considered a good location for energy-intensive industries. Dutch greenhouse horticulture is very extensive, several industrial clusters have been established, and the port of Rotterdam has a strong attraction for chemicals and refineries, among others. This industrial capacity - with its high labour productivity - is of considerable importance for the Dutch economy in a broad sense. Not only because of its large indirect employment, but also because it forms the basis for the manufacturing industry, which makes products such as windmills and fertilisers. These products make an important contribution to the strategic autonomy of the Netherlands and Europe, making basic industry important for, among other things, the success of the energy transition and stability in the food supply.
Recently, we have seen a series of developments that negatively affect the favorable business climate of the Netherlands, particularly for energy-intensive industries. Dutch companies, as in the rest of Europe, face high gas and electricity prices as a result of the sanctions introduced after the Russian invasion of Ukraine. This is often as much as two to three times what American companies pay. Whereas in our surrounding countries the government is trying to accommodate these sectors with tax breaks, the Dutch government has actually decided to make gas and electricity more expensive for large consumers with some measures. In recent years, the Dutch government has also shown with varying policies that it does not have a consistent long-term vision of where it wants to go with the industry. Some measures are at odds with others. As a result, the energy-intensive industry does not really know where it stands. This leads headquarters abroad to postpone investment decisions or move to locations outside the Netherlands.
While the Netherlands is becoming less and less attractive for industrial production relative to its neighbors, the same is true for Europe as a whole. In addition to affordability, the security of supply and/or delivery of energy for European companies is surrounded by increasing risks. Europe is almost entirely dependent on imports for almost all fuels. In addition, other industrial powers have extensive government stimulus programs, such as the Inflation Reduction Act (IRA) in the United States (US) and similar programs in China. The European Union (EU) is a lot less generous with such state support and instead comes up with mostly obligations for companies (such as CSDD and CSRD), which require more administration and controls and thus increase costs. This fits into a broader picture in Europe, where (fossil) energy-intensive companies are slowly but surely losing their social license-to-operate. The focus here is strongly on climate policy, with politicians giving affordability, availability, and strategic independence a lower priority than in other parts of the world.
In this report, we look at recent developments and describe the reasons for the changing investment climate. This overview is needed to arrive at the right strategic choices for the benefit of the Dutch investment climate. Not having a long-term vision is also a choice, but one with potentially major consequences.
The call for greater European cooperation is growing louder as geopolitical tensions rise. Energy security plays a central role in this. Recent agreements on offshore wind power seem to be an important step, but they mask an uncomfortable truth: without a strong commitment to electrification of demand, increased generation will remain a costly sham solution.
Last week, various government leaders in Hamburg announced that countries will be working together more closely in the field of wind energy. Norway, the United Kingdom, Germany, Denmark, Belgium, Iceland, Ireland, Luxembourg, and the Netherlands agreed to build 100 gigawatts (GW) of joint offshore wind projects. This is part of the existing ambition to have a total of 300 GW of offshore wind capacity by 2050.
The announcement was met with much enthusiasm. Rightly so, because there finally seems to be a growing awareness that greater European cooperation is not a luxury in a rapidly changing geopolitical world. Just a few days earlier, President Trump had threatened a number of EU countries with increased import tariffs because they—as NATO members—had sent troops to Greenland.
“Our most loyal ally is increasingly abandoning us Europeans.”
Although this heated debate has cooled down for the time being, there is a growing awareness that our most loyal ally is increasingly letting us down in many areas, including defense, IT, and energy. Greater strategic autonomy is therefore wise, including when it comes to our energy supply.
That is a lesson we could—or rather should—have learned during the energy crisis caused by the war between Ukraine and Russia. That war led to a rapid, forced reduction in our dependence on Russian gas. Although the ambition for 300 GW of offshore wind power arose at that time, it did not yet lead to much concrete action.
You know the reason why. Wind tenders were a flop, partly because wind energy has become significantly more expensive in recent years. Higher costs for materials and labor, combined with governments wanting to make money from tenders, made the business case unprofitable. Without subsidies, additional wind energy, including offshore, simply cannot get off the ground.
In the UK, new wind projects proved to be possible again – with subsidies. In the Netherlands, outgoing Minister Hermans has also made up to four billion euros available for a new 1 GW wind tender. A quick calculation shows how much money is needed for 100 GW, let alone 300 GW. And that's not even taking into account the necessary infrastructure.
“We don't import electrons at all, but molecules.”
Safety comes at a price. If we want to be less dependent on energy imports, we will have to extract and generate more energy ourselves. However, this is where the problem lies. We do not import electrons from Russia or the US, but molecules in the form of oil and gas. Building additional wind farms will not solve this problem by a long shot.
In fact, when there is strong wind and sunshine, we already have too much renewable electricity and have to scale back. The real key to reducing geopolitical dependence therefore lies not primarily in generating more power, but in electrifying our energy demand. Without demand, extra supply is pointless and a wasted investment.
Nevertheless, governments are repeating the same mistake they made in recent years. The idea that more supply will automatically lead to more demand has yielded little results to date. Electricity demand has been stable for years. Sustainability is therefore not being achieved through additional green supply, but through the relocation of CO2 emissions.
These governments would therefore have been better advised to actively stimulate the further electrification of energy demand. Greater demand for electrons naturally leads to a better business case for the generation of green electricity.
“If you want to become less dependent geopolitically, you have to ensure that industry remains in Europe.”
If you want to become less dependent geopolitically, you need to ensure that industry remains in Europe and become less dependent on imports. This requires time and space for companies to remain competitive and become more sustainable through electrification, just as in the built environment. Only if this extra demand for electricity is guaranteed will there be a real need for more domestic renewable energy generation, including offshore wind.
The announcement in Hamburg did state that governments want to stimulate electrification, but while the 100 GW of joint wind projects was presented with great force and determination, this aspect of the transition remained conspicuously vague. This is partly understandable: we are in a hurry. The sustainability targets clash with the time that large-scale electrification simply takes.
The CO2 reduction required to achieve the targets is happening faster than the industry can technically achieve. This results in leakage. Furthermore, anyone who wants to reduce dependence on energy imports must accept that businesses and households cannot do this alone and need financial support, which means that it will inevitably become more expensive. Independence, security, and the phasing out of efficient global trade simply cost a lot of money. And we will have to bear those costs together.
“Only if we tackle everything at once can we hopefully hold our own in the changing world order.”
The political promise that this will not affect our wallets is therefore an empty promise. Passing the bill on to "the big polluters" – often simply our employers – will not lead to sustainability, but to the impoverishment of our industry and thus our economy. Driving away industry may make us less dependent on imported molecules, but it will make us more dependent on semi-finished products and imported goods. The 'advantage' is that we achieve our national climate targets. A typical case of: operation successful, patient dead.
I therefore sincerely hope that the new cabinet will continue to see the bigger picture. And that European leaders will continue to realize that cooperation is the only way forward when it comes to security—not only defense, but also energy security and economic resilience. Not just the low-hanging fruit, such as energy supply, but the whole package, including demand for electrons and infrastructure.
Even if you go all in on this, our dependence will only decrease gradually. A transition takes time. Only by tackling everything at once can we, as Europe, gradually become less dependent on imports and hold our own in a changing world order. If we don't, we will remain a pawn in the power struggle between the US and China.
This column was previously posted on LinkedIn for Studie Energie Opinie.
Hans van Cleef is Head of Energy Research at EqoLibrium (this column was written in a personal capacity).
Although the round trip Route du Soleil has just been made by most of the Dutch, I would like to take you into a crystal ball to next summer. It is early July 2026 when the famous balcony scene heralds the start of a new cabinet. In line with the average duration of the previous three formations, this one too will have lasted about 250 days. Palace Noordeinde fills up with patriotic press delegates on this sun-drenched day. A joyful moment, because our country has a national government again after more than a year of uncertainty.
At the same time, the rock-hard political reality of administrative challenges will make the joy short-lived. The brand-new government will have to do what it can to complete the national budget in time for Budget Day. That won't be easy, however, given the dark cloud that will begin to hang over the people's wallets starting in 2027. Anyway, so much for my crystal ball.
Governing after the sunshine
Glass balls are best left to politicians. After all, they pretend: "To govern is to foresee. This obviously means that good governance takes future developments into account. But does that happen enough? And if they do take the future into account, are they transparent about it? In my view, that very transparency is crucial to maintaining a bond of trust between the people and politicians. If you fall short, trust in politics declines and the playing field is open to populist ideas.
Therefore I would like to extend the popular political phrase as follows: "governing is looking ahead and being transparent about it. In about a month and a half we will again put a red cross in the voting booth. Simple on paper, but in stark contrast to the complexity of the issues. Be it immigration or energy transition. Contrary to what populists would have you believe, reality is one of multiplicity and nuance.
Looking ahead is not enough
I advocate exposing that very complexity! And election time is the right time for that. The people deserve better than unsubtle populist black-and-white thinking. By precisely informing the people about the scope and complexity of national administrative challenges, you invest in a political-social bond of trust. That bond of trust is crucial for an adequate national government that can also tolerate politically difficult but necessary choices.
Such an administrative challenge is a system that will not go into effect until 2027. That may seem like a distant prospect today. Yet this system is one of the first issues a new administration will have to account for. It is about ETS2: a second emissions trading system in addition to the one we already have since 2005 for the power sector and industry. This EU-wide system aims to reduce CO2 emissions, particularly in road transport and the built environment.
The cost of ETS2
Economically, it is a smart system. This is because it does not matter where the CO2 reduction takes place in the EU. This allows the cheapest CO2 reduction to take place first.
It works as follows: The new emissions trading system requires energy suppliers to hedge their customers' CO2 emissions by buying and redeeming emission allowances. There is a limited number of allowances available that decrease each year. These allowances are tradable, creating a price for them. The costs incurred by energy suppliers - both for heat and fuels - will be passed on to the end user. In other words, citizens' energy bills and costs at the pump increase.
A letter from (now outgoing) Climate and Green Growth Minister Hermans (dated Nov. 4, 2024) shows that this system could lead to a cost surcharge of some 11-13 euro cents per liter of gasoline or diesel and 10 euro cents per cubic meter of natural gas. For average households, this adds up to several hundred euros more in costs starting in 2027. In other words, the first impression a new administration will leave is one of bills running into hundreds of euros. The coming into force of this emissions trading scheme is virtually irreversible. Yet the message remains largely understated.
Don't cover it up, but explain it away
The additional message of a rising energy bill may then be uncomfortable. Yet there are precisely political measures that can be taken to reduce the impact, or land the cost where it can be borne. The ETS2 was created to provide a financial incentive for people to move from using fossil fuels to a carbon-neutral footprint.
If that incentive is combined with smart complementary measures at the national level, the pain need not be felt by everyone. A smart approach can actually spare people and help them switch to a clean and affordable energy bill. Thus, the message - as long as it is timely and well explained - need not be a problem for voters.
It is therefore important that voters are included in this story. If you, as a politician, want to do something about trust in politics, the upcoming elections to the House of Representatives are the perfect opportunity to make this subject discussable.
To govern is to look ahead. But then be transparent! If you don't, the risk is that you win the elections at the end of October, but that you lose the trust among your cabinet before you have even started. In doing so, you make the soil fertile once again for the rampant growth of populist roots.
So don't start hiding away, start explaining!
This column was written in a personal capacity by Bart van der Pas.
On May 6, 2025, the European Commission (EC) gave concrete expression to something it has been proclaiming since the Russian invasion of Ukraine in February 2022: on January 1, 2028, the EU will completely stop importing Russian energy. This includes all imports of (especially fossil) fuels, even if EU member states are still locked into long-term contracts with Gazprom, Rosneft, or another Kremlin-controlled state-owned company after 2027.
Immediately after publication, several experts expressed doubts about the legal tenability of the force majeure provision, which is supposed to allow Western companies to unilaterally terminate their long-term contracts. Less media attention was paid to the part of the REPowerEU plan that comes into effect earlier: as of Jan. 1, 2026, imports of Russian energy through the spot market are prohibited.
Europe faces a risky winter
In 2024, the EU imported 52 bcm of gas from Russia, accounting for about 19% of total gas imports. According to the EC, about a third of Russian gas imports reach the European market through spot deliveries. That means EU member states will have to commit some 15 to 20 bcm of gas elsewhere sometime between now and Jan. 1, 2026 to maintain current import levels - or gamble on the spot market.
The gas market is still tight, underscoring the importance of keeping gas imports up. Although the filling of European gas stocks is going better than expected, it is definitely not holding up. The Netherlands is expected to meet its national target of 80% (110 TWh) by Nov. 1, but with a current fill rate of 59%, the level is considerably lower than in the previous two years. A similar picture is visible elsewhere in Europe, such as Germany (62%).
Avoiding setbacks in filling gas reserves, preventing accelerated withdrawals from them, and continuing to bring in gas imports during the winter months are crucial to keeping gas affordable in Europe. In practice, affordability is largely in the hands of the weather gods. Here we depend not only on the absence of heat waves and temperatures in Europe in the coming winter (2025-2026), but also on the weather in Asia (both summer and winter). Fingers crossed, you can almost hear the EC thinking.
Even with Russian spot supplies, the gas market situation is tense. This makes the timely replacement of the nearly 20 bcm that will be gone by January 1, 2026 all the more important. Most of the gas coming onto the market in 2025 that is not yet committed to long-term contracts is American (about 23 bcm). While this does not look bad on paper, given Europe's earlier 'trade deal' with President Trump, it does mean that the EU is largely handing itself over to the US.
For LNG, the EU is now 55% dependent on the US - up sharply from 40% in 2024. With the ban on gas imports from Russia, the dependency only threatens to increase further. Before the Russian invasion of Ukraine, Europe was dependent on Russia for about 40% of its gas demand. Even then, diversification was the watchword, as it is now.
Russia's war economy is running properly
Eighteen sanctions packages and a veritable roadmap later, however, the Russian economy is still running as it should. Economic growth was around 4% in 2024 and is expected to reach 1.1% this year. Despite massive military spending, the budget deficit is reportedly only 1.7%, although this is partly due to the low exchange rate of the Russian ruble.
The absence of economic malaise is largely due to the (deliberately created) ineffectiveness of sanctions from the G7 and the EU. These were introduced one by one and at long intervals, giving the Russian government and business community plenty of time to adjust.
As a result, the sanctions have mainly led to a shift in trade flows. Europe still imports much Russian energy, albeit - in addition to LNG - largely indirectly; for example, in the form of oil products through third countries such as Turkey and India, or natural gas processed into fertilizer. In addition, trade between Europe and Russia-affiliated countries such as Kazakhstan, Georgia, Kyrgyzstan and Armenia has picked up since the outbreak of war. Through these routes, Russian products still find their way to Europe - and European products to Russia.
Sanctions are a balancing act
Europe's policy toward Russia constantly seeks a balance: hitting the country economically, without raising prices in Europe too much. The resulting sanctions packages hurt Russia, but have by no means brought the economy to its knees. The European ban on Russian energy imports is unlikely to succeed either - even though the side effects for Europe will be felt.
By banning Russian spot deliveries as of Jan. 1, 2026, the EC is knowingly putting pressure on affordability - and possibly even security of supply. This makes good political sense: Putin is an aggressor and must be opposed. Taking the wind out of Russia's sails financially is an important part of this.
At the same time, gas and electricity prices in Europe are still two to three times higher than elsewhere in the world. As a result, expanding supply should be the logical goal. Instead, with the elimination of Russian gas, trade flows will first have to be shifted to maintain current supply at all.
Structurally higher energy prices have irreversible consequences for energy-intensive industries - with all the implications for strategic autonomy. In addition, high energy prices for consumers and the loss of jobs lead to social discontent, fueling populism. When citizens are faced with rising energy bills and job losses in traditional sectors, already shaky distrust of established politics grows. This creates fertile ground for parties opposed to European integration and international cooperation. Thus, with this policy, Europe may be undermining its own democratic foundation - and playing right into Putin's hands.
This column was written in a personal capacity by Fabian Steenbergen.
The cabinet has fallen. Less than a year after the coalition formed a government, the Netherlands is heading for the next elections. It's not the first cabinet to fail to reach the finish line, and it certainly won't be the last. But it did get me thinking about the similarities between the energy transition and politics. And if you think about it for a moment, there are some major similarities. I will highlight three.
From centralized to decentralized
It is not so long ago that we had such large political parties in the Netherlands that a coalition with a large majority in the Lower House could already be formed with two parties. The PVDA, for example, always had more than 35 seats until 2002. The later CDA even always had more than 50 seats until the late 1980s. After the last three elections, however, we needed at least four parties to form a coalition. Furthermore, we saw the number of political parties increase significantly in recent years. In 2021, a record number of 37 political parties participated in the House of Representatives elections. That's 37 parties seeking to raise their profile and represent their constituencies.
This fragmentation of politics could be compared to the change in the energy and electricity mix. The generation of energy is also more fragmented. With the advent of solar and wind power, electricity is generated much more decentrally than before. Earlier, we had large power plants (mostly coal and gas plants) that served many consumers from a single point. Due to the fragmentation of our energy supply, we also run into challenges such as predictability and availability of space on the power grid. Finally, not only do we have many more producers (from coal and gas plants to wind and solar producers), but many of those producers are consumers themselves. It makes both politics and the electricity market a lot more complex.
From long to short
An important advantage of large political parties is that it creates room for these political parties to make long-term policies. This is possible under the assumption that you are not at the helm for just one reign, but are able to work on a dossier for a longer period of time. In the current political landscape, the focus is mainly on trying to satisfy voters in the short term. After all, there are always new elections coming up. This is at the expense of long-term policies.
With more solar and wind, not only is our electricity being generated more decentrally, but the supply of energy is becoming more volatile - or movable. The sun does not shine 24 hours a day, and wind supply can also vary from hour to hour. Renewable energy, like Dutch cabinets, is often "outgoing. That in itself is not a problem, but it requires much more effort from energy companies and grid operators. They have to make sure that the electricity grid is not overloaded and also that the demand for electricity can always be met. So here too, (investment) policies are needed that look beyond the current (short-term) generation of energy and ensure that electricity grids continue to meet requirements in the future.
Need for stability
With new elections approaching, the current outgoing administration will likely continue to govern on those issues that the House of Representatives believes cannot wait. And there are quite a few. Important decisions await in the areas of security/defense, nitrogen, migration, and the budget for the coming year must also be finalized. Many a voter yearns for longer stability in policy. Something that would also be embraced by businesses because many investments for the further future - for example, in making business processes more sustainable - are not going ahead now. Not only because market conditions are uncertain, but also because political risks for companies in our country have increased sharply in recent years. Companies no longer know where they stand, and that has a paralyzing effect.
Stability is also needed for our energy supply. More solar and wind in the energy mix leads to a more volatile supply than traditional energy sources. A more volatile supply is not a problem at all, as long as the energy system is prepared for it. This means that as more solar and wind enter the mix, there must still be sufficient alternatives for the times when this is not the case.
This can be done in part by storing the electricity in batteries, for example. For now, the possibilities for long-term storage of electricity are limited. It is therefore necessary that flexible power plants also remain available that can generate electricity when solar and wind power or storage cannot. The pressurized nuclear, coal and gas power plants can - if necessary - provide a constant "base-load" of electricity. Finally, major investments are needed to expand the electricity grid to (continue to) achieve further electrification of our energy demand, and stability.
Is the energy market learning from politics?
Both politics and the energy market have become quite fragmented in recent years. In addition, the focus has shifted from long-term to short-term. Finally, the need for stability is increasingly urgent in order to unlock large-scale investments. It shows that there are many similarities between politics and energy markets. One major blackout in Spain recently showed what the consequences of a failing energy system can be for society and the economy. Let us hope that the fall of Cabinet Schoof I is also not a harbinger of the failure of the electricity market in the Netherlands and that any comparison on this point is flawed.
This column was written in a personal capacity by Hans van Cleef.
At election time, political parties are good at finding financial space for issues that make the collective heart beat faster: healthcare, education, security. This is understandable - these are tangible issues, with direct impact on the daily lives of many people. At the same time, it is striking that climate policy rarely plays a decisive role in the voting booth for the majority of people, despite the enormous social task involved.
The reason is partly psychological, partly political. Climate change, and thus climate policy, is relatively intangible. The benefits are in the long term and are little to not visible. The burdens are often short-term. Moreover, climate problems are transboundary. While the costs are mostly felt locally, the benefits are diffuse and spread globally. This makes it difficult to get citizens excited about policies that cost money today, while the measurable benefits come only decades later and partly in other parts of the world.
Need for stability
This fundamentally distinguishes climate policy from classic areas of government. In healthcare, education or security, people see the effects of policy investments relatively quickly. A waiting list that gets shorter, a class that gets smaller, a neighborhood cop who patrols visibly. Climate policy, on the other hand, often requires behavioral change, technological innovation and redistribution of costs. Moreover, effective climate policy requires stable direction to reduce financial-political investment risks.
And there's the rub. Because climate policy is highly dependent on changing cabinet coalitions that emerge from election results in which climate is rarely the main issue. There are voters who make climate policy the main issue in their personal political choice, but so far this has always been the vast minority. The result is that time and again new political constellations are formed that revise old plans, shift accents elsewhere or postpone policy goals. This creates a pattern of fragmentation and uncertainty, which undermines the willingness of citizens, companies and international partners to invest. The energy transition thus becomes a patchwork quilt that is constantly being tugged at.
Household prices are going up...
This is worrisome, especially with drastic measures in the pipeline. Take ETS2: the new European emissions trading system for road transport and the built environment, among others. From 2027, CO₂ emissions in those sectors will have a price. In practice, that means higher costs for citizens who have a central heating boiler and drive on gasoline or diesel. Current calculations assume an increase of about 10 to 15 cents per liter of gasoline or per cubic meter of gas. A serious price increase for many households, especially during times of economic uncertainty.
Although the ETS2 provides some sort of price cap to protect citizens from excessive burdens, I have my doubts about its effectiveness. Again, the benefits of this climate policy are long-term and collective, while the burdens may be individual and acute. Those with well-insulated homes and electric vehicles may not notice much. But for those without the financial room to make it more sustainable, the bill could be steep.
... which will increase the pressure on political support
The political risk is obvious. When climate policy is associated with costs, while the benefits remain abstract, the populist frame lurks: expensive, unfair, pointless. In contrast is an electorally awkward narrative about scientific models, global emissions targets and intergenerational justice. Broader layers of voters in previous elections saw bread in a national responsibility for meeting climate goals. The question is whether this broad support holds up at a time when the costs of climate policy are becoming increasingly visible and felt. The answer to this rhetorical question is predictable: climate is a policy area with many electoral risks.
This outlook could be bleak. Yet I believe there are ways to deal with this in a different way. In fact, the electoral risks associated with climate policies can be an incentive for social mobilization. Not only through protests against government policies, but also through joint initiatives that are complementary to government policies. If you look at the public demonstrations against the (lack of) climate policy, I see a large potential of people who could possibly also be mobilized financially. Furthermore, in addition to this group of involved and outspoken citizens, there is undoubtedly a broader, more silent majority who may not participate in demonstrations, but who are willing to contribute financially in a relatively low-key way. This kind of social initiative could be based on another form of solidarity: conditional cooperation.
Conditional financial cooperation offers opportunities for acceleration
The idea is simple, but powerful. People are more willing to contribute to a collective cause if they know others are doing the same. No one feels compelled to donate, say, a hundred euros to climate policy on their own. But if there is certainty that, say, one million others do as well, the perspective changes. Then it feels fair, proportionate and supported.
Imagine a system in which people can commit to a contribution - for example, a percentage of their income or savings - under the condition that a predetermined number of other citizens do the same. Only when the critical mass is reached is the contribution collected. The destination of the money is transparent and targeted. For example, home insulation, renewable energy projects or climate technology.
Such a mechanism - based on the principle of conditional cooperation - offers opportunities to unlock social affordability for climate policy without depending on the erratic political tide. It is not an alternative to government, but a complement in an area where public consistency has become rare. Of course, the success of such a mechanism lies in the details of implementation. Among other things, thought must be given to institutionalizing the mechanism, communication, accessibility and transparency. Yet it all starts with an idea on paper.
This is why I believe that conditional cooperation can grow into a new form of climate solidarity: voluntary, proportional and supported. Not imposed, but arising from a shared willingness to contribute - provided that others do the same. If politics is too shaky to stay the course, we must look for structures that will hold. Not a plea to sideline the government, but to organize social decisiveness where public support is under pressure.
This column was written in a personal capacity by Bart van der Pas.
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