The Netherlands would pay 17.5 billion annually in fossil subsidies. Is that right?
Climate activists and economists demand that the Dutch government stop providing financial incentives for the use of coal, oil and gas. The government and researchers agree on how much money it would involve.
It is perhaps the most concrete topic that climate activists are protesting this year: the fossil fuel subsidies, with which the government would continue to support the burning of coal, oil and gas. ‘Fossil subsidies off the job’, was in the capital letters two weeks ago on the banner of Extinction Rebellion activists blocking the A12. On the highway wall behind it were spray can letters ‘Stop fossil subsidy’. Speaking to a Powned reporter, an activist explained that he was blocking the highway “to demand an end to the 17.5 billion fossil subsidies that are still being spent every year in the Netherlands”.
The current government plans are not yet based on achieving the Dutch climate targets. That is why environmentalists are increasingly turning against financial incentives for fossil fuels.
The criticism is not new, but the number of 17.5 billion per year that keeps recurring is new. When activist Janny Kerssies campaigned at Schiphol last month, she said to De Stentor that they themselves live sustainably, but feel that the government owes it, by ‘giving 17.5 billion to fossil companies’.
Thousands of euros per inhabitant per year
The number has now acquired an almost political meaning and is also used by parties such as GroenLinks and Party for the Animals. The number comes from economic researcher and former PvdA MEP Alman Metten (74), calculated last year on his own initiative and guaranteed. There is unity about this number, for example from the government itself. For example, the government specifically labels an amount of 4.2 billion euros as ‘fossil subsidies’. The government has also taken steps to phase out those kinds of financial incentives, together with other European countries, in order to achieve the climate goals.
But that 4.2 billion seems to be a major underestimate, as was also shown last week, when more than one hundred and three economists a fire letter approach. Influential economies such as Sweder van Wijnbergen and Esther Philipsen called on the government to stop fossil subsidies ‘immediately’, because they would counteract climate goals. They also call the solution Mettens estimated of probably 17.5 billion – ‘thousand euros per inhabitant per year’.
How much money does the Dutch government actually spend on fossil fuel subsidies, how distributed is this, and what are fossil fuel subsidies?
Not this time
First that last question. Fossil subsidies are not traditional subsidies, whereby companies receive money as a gift to be able to burn coal, for example. The definition of ‘subsidies’ that the government itself uses is broader, and covers various types of financial incentives that stimulate the use of fossil fuels. These are mainly tax subsidies, for example for large consumers such as Tata Steel, who pay hardly any tax on their energy compared to normal citizens. Or the exemption from tax on kerosene and fuel oil for ships, so that aviation and shipping can refuel relatively cheaply.
You can see these financial incentives as subsidies, because the government misses out on about 2.5 billion euros in tax per year through, for example, the exemption on kerosene. The idea is that if the government had taxed kerosene, those billions would be for the treasury, so that other taxes, for example for green electricity for citizens, could be reduced.
Researcher Alman Metten says over the phone that fossil subsidies are “problematic” and “out of date” in his view. “The fact that large consumers such as Tata Steel still pay an incredibly low tax rate on their energy means that they feel little pressure to save energy or switch to more sustainable energy sources.” That higher energy prices lead to more savings during the energy crisis; the industry is now trying to save a lot of gas, among other things. “Stopping fossil subsidies would have a similar effect,” says Metten.
He says he is happy to see that his 17.5 billion is being collected more and more. “I stand behind the number and the calculation.” As an old PvdA MEP, he assumed that the figure would be mistrusted because of his political background, which would make him the calculation published in full transparency. “Anyone can calculate it.”
Calculations with public figures
Metten explained how he arrived at the amount. The government will provide its own figures in 2020, which show, among other things, that it misses out on 2.5 billion euros per year in excise duties on kerosene and 160 million euros on the lower energy rate for greenhouse horticulture. In total, the government amounts to 4.2 billion euros. In these figures, however, the cabinet leaves open fields for a few major items, such as the lower tax rate for large-scale energy consumers. With the many holes in it, by calculating the difference between the low rate for large consumers and the high rate for normal hamburgers from small and medium-sized businesses. Through this kind of calculation with public figures, he arrives at the ‘at least 17.3 billion’ per year in fossil subsidies. That became popularly 17.5 billion.
The Ministry of Economic Affairs and Climate Policy sticks to the aforementioned 4.2 billion. It does not want to link a concrete amount to the low tax rates for energy for large consumers. How much you rise, the reasoning goes, depends, for example, on which rate you follow the low rate – which huge one you take. Metten is certain that the government will then choose not to adopt a standard at all. According to him, it is also a nonsense argument, because the cabinet has calculated that in other cases, such as with the low taxes for greenhouse horticulture. Metten thinks that the cabinet deliberately remains invisible, because it does not want to cut itself in the flesh. In any case, the total amount will be higher than the reported 4.2 billion.
No scientific consensus
The fact that there is so much uncertainty about the billions with which the government uses fossil fuels is unacceptable, according to Barbara Baarsma, professor of applied economics at the University of Amsterdam (UvA). According to her, the gap in the government figures means that different researchers all come up with their own calculations. For example, two years ago environmental organizations Milieudefensie and Oil Change International calculated the fossil subsidies of more than 8 billion euros per year. On the other hand, independent economist Wouter Roorda responded to the 17.5 billion with a virtual figure: according to him, the government only levies 35 billion euros in taxes on the use of fossil fuels. Roorda is critical of the fuss about the ‘climate crisis’ on Twitter, about which there is no scientific consensus, according to him.
Professor Baarsma concludes that taxes on fossil fuels, such as petrol stations, do not necessarily imply that the government can simultaneously stimulate use through other financial incentives. Baarsma wants the government to quickly provide insight into the actual size of these types of financial incentives. “It is a public task to provide completeness about subsidies.” If they do not, then the Court of Audit has a controlled investigation task, she says.
Unanimity of all requirements
The Netherlands has almost every ambition to phase out fossil subsidies, as long as this is done on an equal footing with other European countries. Worldwide doubled the number of fossil subsidies almost in 2021, while Europe is making concrete plans to phase them out. For example, with the ‘Fit for 55’ sustainability package, Europe wants to levy tax on aviation fuel within Europe for the first time. It also wants to change the tax rates for energy: no longer different rates for large or small consumers, but rather different rates for users of clean or clean energy. The Netherlands agrees with these plans, as long as a ‘level playing field’ with respect to other European countries is taken into account. The fear is that companies will otherwise leave the Netherlands at Higher Energy Rates.
This reluctance can ensure that the amount of fossil subsidies will barely decrease in the early years, Baarsma fears. Within Europe, creating new tax rules is one of the most difficult tasks. Unlike the introduction of environmental laws or the prices of CO2 emissions, agreements on taxes require unanimity of all shared requirements. Countries such as Malta and Cyprus, for example, are opposed to a proposal to tax kerosene within Europe, because they benefit from low flight prices. If the ‘level playing field’ disappears and remains unchanged for years, the old may lead to the Netherlands also scaling back its fossil subsidies indefinitely, or that they may even increase due to the energy crisis.
Netherlands guide country
Baarsma believes that the Netherlands should be a guiding country. As early as 2013, the Netherlands said it wanted to phase out subsidies announced within the EU. In the nine years since then, little has happened. The coalition agreement does mention a number of concrete intentions. For example, the Netherlands wants to abolish the reduced tax rate on energy for greenhouse horticulture, which would mean several tens of millions of euros in fossil subsidies from 2025. A good step, says Metten, but “a pittance” on the annual amount of billions.
Economists differ in opinion about the demand from the Netherlands within Europe that should be more in advance. It seems that the call to end the subsidies. “This is necessary for our country”, the more than three hundred economists write in their brief, “which is very vulnerable to sea level rise due to global warming. But also and above all to keep our entire planet liveable for current and future generations.”
But the classic economy Roorda causes the direct consequences of the increase in taxes on fossil energy. According to him, higher energy prices could lead to more success. “I don’t think that’s feasible.”
Short-sighted choice
Metten and Baarsma say that there are always practical problems for the short term in order not to stop fossil fuel subsidies, but that the Netherlands will never achieve its climate goals in this way. The European Commission calculated that the proposals for phasing out fossil subsidies in Europe could lead to a 1.6 percent reduction in emissions in 2035, while the economic growth of everything would slow down by less than 0.1 percent.
According to economist Sweder van Wijnbergen, abolishing fossil fuel subsidies would only boost sustainability and green investments. “Maintaining it, with a level playing field as an argument, is a short-sighted choice, which is precisely for the economy of the Netherlands of tomorrow.”
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