The big challenge for Sophie Hermans landed this week. She has been Minister of Climate and Green Growth for just two months and then Mario Draghi comes with a report on the future of a trapped Europe. On exactly two main points his advice to the Netherlands is contrary to the legacy of former Climate Minister Rob Jetten.
One: Draghi repeatedly warns that it is dangerous for the future of the European welfare state if our CO2 ambitions are so much more compelling than in the US and China. Europe demands 55 percent less CO2 in 2030; the US has a ‘non-binding aspiration of 50-52 percent less CO2 calculated from a (higher chosen) starting year in 2005’. And in the meantime, China is rapidly opening more coal-fired power stations, including for district heating in the far North. Too bad it has to be done, but understandable. I once went to Harbin in January (close to the Siberian border, ten million inhabitants, beautiful sunny skiing weather during the day at 25 degrees below zero; minus 30 at night).
Two: For big industry, Draghi’s main recommendation is: “It is evident that a broadly diversified supply of energy (especially including LNG and also nuclear) ensures lower prices and a competitive advantage.” Draghi calculates the difference in costs between Spain (broad supply) and Germany (no nuclear), thus illustrating how costly it is to pursue a dogmatic energy policy.
Being a leader is risky
What now threatens is that our politicians will leave these concrete recommendations there and fire their ammunition at another proposal, namely yet another European investment fund. The German liberals of the FDP immediately came up with objections and it is politically safe for VVD, PVV and BBB to follow in that footsteps. A sneer at the carefree crickets on the Mediterranean who want to spend our money always goes down well with the ants in Dutch politics. Ask ‘Il Duro’ Gerrit Zalm (VVD) and Jeroen Disselbloem (PvdA).
Politically more difficult but much more useful is to also tackle the two recommendations of Draghi that are difficult for the Netherlands. Draghi warns Europe that there are high costs associated with the ambition to be a frontrunner with an unwavering goal for CO2 reduction in the short term of 2030. This applies even more to a small, open economy that has extra difficulty with CO2 reduction, partly because we have the largest port in the whole of Europe here. That port emits a lot of CO2, but also works for the benefit of our neighbouring countries where the containers from Rotterdam go by car, train or ship. That requires an adjustment of our climate law – not to stop trying to emit less CO2, but to place the issue better within the European context.
Draghi’s second recommendation is, if possible, even more controversial for the Netherlands. He wants lower energy costs through an optimal mix of different forms of energy. Nowhere else in the EU is this more urgent than in the Netherlands, because we have the highest energy costs in all of Europe. The EU regularly publishes a comparison and sets the EU average at one hundred. In the latest report, the Netherlands is lonely at the highest place with 150. Number two on this ranking is Germany with 124; all other EU countries are cheaper, with France for example at 92.
Of course, there is no point in meeting in Brussels to discuss pan-European subsidies for industry – and hoping that the Netherlands will get a fair share of new projects – when energy costs here are 20 percent higher than in Germany, 60 percent higher than in France and 65 percent higher than in Spain.
Promising lower energy costs is politically difficult for Hermans. Her VVD leans against the big business of VNO-NCW that sees work in cabling the North Sea for many more windmills and for building hydrogen factories in Europoort. All that will not be possible without high subsidies from the Ministry of Climate and Green Growth. That is why, I think, the VVD has such ambivalent views on ‘wind at sea’, very different from coalition partners PVV and BBB who are against it for financial and environmental reasons. If the cabinet does continue with ‘wind at sea’, then on top of the subsidies for the construction of the quickly rusting two-hundred-metre-high monsters, there will be the costs of maintenance and reinforcement of the energy cables that threaten to amount to around fifty billion for the North Sea alone. We will soon see that reflected in the energy costs.
Break with Jetten’s policy
Stopping ‘wind at sea’ to reduce energy costs means breaking with the policy initiated by Rob Jetten. It would place the VVD in the centre-right camp, and perhaps that party does not want that (yet). Opposition leader Frans Timmermans will certainly theatrically claim that an unbearably hot planet is apparently unimportant to the VVD, and that the liberals therefore no longer care about the future of our children. That will be a challenge for Hermans to find the right words, but it has to be done. Making energy cheaper in the Netherlands is not possible without a stop to more wind turbines in the North Sea.
Draghi’s second point – a well-distributed supply of energy carriers – is easier in comparison. The Netherlands is already prepared for more nuclear energy and the opposition to more import of LNG seems politically surmountable. Hermans does not have to convince her own party so much, but has to fight the civil servants in her ministry and with advisory bodies such as the Netherlands Environmental Assessment Agency (PBL) and the Scientific Climate Council.
A strong policy for more nuclear and more liquid gas can count on the support of all our SMEs. The VVD will not want to see all those entrepreneurs and their employees drifting away to PVV and BBB any longer. So it practically depends on whether Hermans is clever enough to get her own civil servants on board. The fate of former Speaker of the House Khadija Arib is a warning that in our Hague swamp, not only men succumb to anonymous accusations from their civil servants. If Hermans does get the civil servants on board, then it is only necessary to neutralize the voices of a few environmental professors with voices of experts who do agree with Draghi’s advice to make energy cheaper.
In 1982, the change to a more sensible policy did not come because the new prime minister Ruud Lubbers was a more brilliant economist than his predecessors Joop den Uyl and Dries van Agt. The change came because the objective economic circumstances changed. From that moment on, nobody listened to professor Jan Pen with his theory that the economy had to shrink.
Different times, different sounds
Perhaps very soon there will be no more podium in the media for Pen’s descendants. The environmental professors, I mean, who advocate ‘degrowth‘ because they are willing to sacrifice everything for less CO2 emissions. Different times bring different voices.
In Germany, Volkswagen is collapsing and consumption is falling by one and a half percent per year. Draghi is giving Germany and the Netherlands, two countries with high energy costs and too little liquid gas and nuclear, the logical direction to recovery. Let’s hope that Sophie Hermans and her VVD understand those signs.
Eduard Bomhoffis a former professor of economics at Erasmus University Rotterdam, Nyenrode and Monash University. In 2002 he was deputy prime minister in the first Balkenende cabinet.
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