Energy transition will only fly if we are vigilant over costs

by: Hans van Cleef

Before the ink of the Dutch Climate Agreement had even dried, many parties rushed to call it a disappointment, that it delays crucial decisions, lacks ambition, and that it gives industry an easy ride. According to some NGOs, these proposals will only take us from The Hague to Antwerp, when we need to go to Paris instead. A more optimistic view would be that the carbon reduction of 49% in 2030 is intact, that all parties stayed at the negotiating table, and that the proposals – although sometimes no more than rough outlines – seem to be supported by all parties. Things could turn out just fine after all. As with caterpillars, here too, a transition is not realized from one day to another, and so the energy transition could yet emerge as a butterfly. And we all know that if you want to go to Paris from The Hague, it is quite logical to travel via Antwerp.

Some commitments had already been made in the coalition agreement, but this was not enough. Many details were to be confirmed in this climate agreement. Now it is back on the Minister’s desk. Various groups have indicated a direction, but for the moment have avoided making tough decisions or dramatic changes. A few other groups have come up with more concrete plans, which will be worked on by CPB Netherlands Bureau for Economic Policy Analysis and by PBL Netherlands Environmental Assessment Agency this summer. Left or right, climate policy is ultimately political. The Dutch way of ‘polderen’ (consensus decision-making) works to a certain extent. Yet the really difficult decisions have to be made by the government. Here, the government will have to balance the country’s international obligations on one hand, and the consequences for the wallet of Dutch citizens on the other.

Minister Wiebes (Economic Affairs and Climate Policy) said during the presentation of the Dutch Climate Agreement that “love goes through the stomach, support through the wallet” (in reference to a rather difficult-to-translate Dutch saying). And that is absolutely true. Nevertheless, discussing costs is still a difficult issue. Immediately, it is rightly stated that there are also economic benefits from the Agreement. Ed Nijpels, chairman of the climate discussion tables, pointed to economic growth, extra jobs and innovation during his speech at the presentation of the Climate Agreement. An added benefit is that we help to prevent climate damage with these investments. Yet the discussion about these initial investment costs in the Netherlands is difficult. The benefits of course do exist, but are often not immediate, and/or not necessarily in our country. At the same time, jobs in other parts of the Dutch energy sector – such as upstream gas production, or coal-fired power plants – will be lost, and the transition will initially cost money. That makes it politically difficult. How these costs are distributed is a political choice. That requires potential tax and benefit policy changes alongside those of climate policy. These initial costs will always end up being borne by citizens – directly or indirectly through taxes. The business community must also bear its fair share of costs. But of course these costs are (partly) passed on to the consumer, or the citizen, after all.

Nijpels said that the polluter must pay and that the climate agreement will only be successful if everyone participates. And that is exactly where emotion comes into play. Because if funding comes from the citizens’ wallet, it is important to be transparent about the effect on their disposable incomes. Because even the train to Antwerp does not run for free. We will also feel this first stage in our wallets. The costs are felt before the benefits, and this trip may cost a bit. But best not to leave the traveler in the dark about the costs involved, or they will become apprehensive and lose trust in the process.

If you encourage and support a good alternative, you will create a market for it. Just as with offshore wind and solar panels, you gain scale by always keeping the costs in sight. With mobility and the built environment – that which directly affects the citizen – you will only see the required scale to get to Paris when the costs fall quickly and the comfort stays at least the same. Showing that something works and what it costs is much more persuasive than merely preaching about how things should be done differently – especially in a discussion about energy transition that is already full of emotions. Only then will sustainability really transform from a buzzword into a lifestyle (…or a caterpillar to a butterfly).

This column was published earlier in Dutch on Energiepodium.nl