Dutch coalition agreement – A greener future

After a record breaking 273 days, the liberals (VVD), (Christian) democrats (D66 and CDA) and orthodox Christians (ChristenUnie) presented their coalition agreement “Looking out for each other, look ahead to the future” (Omzien naar elkaar, vooruitkijken naar de toekomst) on 15 December 2021 (the “Coalition Agreement”). The Coalition Agreement serves as a policy roadmap, in which the four coalition parties have laid down their ambitions, goals and focus points for the next four years. This paves the way for the formation of a new Dutch government, Rutte IV, which is expected to be formally announced in January 2022.

“Sustainability”, “net-zero transition”, “circular economy”, “fossil fuel free” and “green industrial policy” are words included in the Coalition Agreement. These words demonstrate the parties’ desire to build a greener future for the Netherlands and take a leading role in Europe in the transition to a green economy. Actually, climate policy and management of the climate and transition fund will become the responsibility of a new “Minister of Climate and Energy”. The emphasis on ESG-related topics is also evident from one of the seven chapters titled: “Sustainable Land” (Duurzaam Land). The Coalition Agreement does not contain detailed plans on implementation but provides a valuable insight into how the to be formed new Dutch government intends to address ESG-related topics in the next four year period.

Climate Policy

The Netherlands wants to lead Europe in the fight against global warming. A great number of initiatives will be rolled out to achieve such a leading role:

• Increasing the CO2 emission reduction target in the Dutch Climate Act (Klimaatwet) to at least 55% in 2030 (but the Netherlands will focus its policy on a 60% CO2 emission reduction in 2030). Simultaneously, in the longer run reductions of 70% in 2035 and 80% in 2040 are being targeted.
• The new Dutch government will take the necessary steps for opening two new nuclear power plants in the Netherlands and extending the operational period for the Borssele nuclear power plant. These steps cover, amongst other things, facilitating parties in their explorations, supporting innovations, inviting tenders, reviewing the government’s (financial) contribution, and amending relevant legislation and regulation.
• A €35 billion climate- and transition fund, supervised by the Dutch Minister of Climate and Energy, will be instituted to assist with and facilitate the installation of the required (large-scale) energy infrastructure, futureproofing energy networks, realising the implementation of green industrial politics and making mobility and the built environment more sustainable. This fund is in addition to the Stimulation of Sustainable Energy Transition subsidy scheme (SDE++ subsidy scheme). In 2022 an amount of €5 billion is budgeted for SDE++ subsidies.
• Incentivisation of decarbonisation initiatives through increasing the marginal cost on top of the price of the European Emission Trading System and the introduction of a rising floor price of the ETS price.
• A green industrial politics instrument is necessary. This comprises amongst other things, that the new Dutch government will enter binding and tailormade agreements with the 10 to 20 largest industrial greenhouse gas emitters in the Netherlands. Commitments agreed therein comprise the governments safeguarding that necessary infrastructure is being developed and funding made available, but also that reciprocal commitments are being asked from the industrial parties (i.e. co-investments in education, good employership and long-investment horizons in the Netherlands).
• Innovation and a mission-driven innovation policy focused on a circular economy, climate and energy transition to an economy based on clean energy and bio-based materials will also form part of a green industrial politics instrument.

Below, we will focus in a bit more detail on particular actions advocated by the coalition parties to get to a net zero transition in the decades following 2030.

Renewable energy and energy mix

A climate-neutral energy supply after 2030 requires a change of the current energy mix in the Netherlands. Steps have been taken in recent years to achieve the same, but additional increased use of zero emissions energy sources will be required. Therefore, the supply of renewable energy sources will be stimulated by increasing offshore wind energy, rooftop solar energy, geothermal energy, aqua thermal energy and green gas.

Gas production in Groningen will be phased out as soon as possible. No new permits will be issued for the gas exploration under the Wadden Sea (Waddenzee). The new Dutch government remains supportive of gas exploration and production in the North Sea. In addition, the possibility of phasing out financial incentives for fossil fuels and, where possible, even terminating such financial incentives will be investigated. The latter will be undertaken in conjunction with other countries so that the Dutch economy would not be adversely affected.

Hydrogen

The production of (green) hydrogen in the Netherlands but also the import of hydrogen will be scaled up. The climate and transition fund will contribute to the further construction and roll-out of the necessary hydrogen infrastructure in the Netherlands. It is expected that the new Dutch government will soon formally appoint Gasunie as the (national) hydrogen grid operator. The current Dutch government announced in September 2021 that an amount of €750 million will be made available to make preparations for the conversion of the existing natural gas pipelines network ready as a hydrogen backbone for the transport of hydrogen.

Besides offshore wind power, nuclear power can also be used for the production of (green) hydrogen. In addition, the further focus on and expansion of carbon capture and storage possibilities will stimulate the production of blue hydrogen. In this context, additional (investment in) infrastructure for CO2 transport and storage is required (next to current developments in Porthos and Aramis).

Mobility

The mobility sector (cars and transport, aviation and shipping) will be required to substantially reduce greenhouse gas emissions. The coalition parties will strive for all new cars to be emission-free by 2030. Furthermore, electronic transport will be stimulated further by accelerating and improving the charging infrastructure for cars in the Netherlands.

In the aviation sector further investments will be made in the development and production of synthetic kerosene and other sustainable aviation fuels. Blending of bio-kerosene will become compulsory. The new Dutch government will confirm and support the proposals by the European Commission on kerosene-taxes and maximum emission emittance per airport.

Buildings and built environment

The coalition parties will adopt a more pragmatic approach and encourage the insulation of residential homes via a long-term National Insulation Program (Nationaal Isolatieprogramma). Effectively, this alters the current approach of having a gas-free built environment (van het gas af). Insulation of residential homes must be implemented more quickly, smartly and socially. For the short term, hybrid heat pumps are considered a proper solution. At the neighbourhood level, where it is cost-effective, sustainable heat networks will be realised. A subsidy scheme is to provide (partial) financial support for the unprofitable top of collective heating projects.

Corporate social responsibility and social entrepreneurship

The Coalition Agreement provides the framework to facilitate corporate social responsibility in the Netherlands. The introduction of the socially private company with limited liability (Maatschappelijke B.V.) in Dutch law will be continued. Furthermore, the Netherlands promotes international and European corporate social responsibility (maatschappelijk verantwoord ondernemen (MVO)) legislation. That said, business undertakings must do their fair share and take into account the interests of both people and the environment and the coalition parties call them to action.