The government announced this on Thursday following two studies it had conducted in recent months into the requirements it must impose on state aid for Tata. In February, a committee led by NWO chairman Marcel Levi recommended attaching strict conditions and health requirements to state aid for Tata. The second report also became public on Thursday, that of Hans Wijers (former minister and former Akzo CEO) and Frans Blom (former boss of the Boston Consulting Group).
About the author
Tjerk Gualthérie van Weezel is economics editor of de Volkskrant. He is writing about energy and the impact of the energy transition on daily life.
The steel factory in IJmuiden is the largest CO₂ emitter in the Netherlands, accounting for 6 percent of total Dutch emissions. As a result, Tata is at the top of the list of companies with which the government wants to make so-called ‘customized agreements’. Agreements in which companies work out how they can adapt their production processes in such a way that their CO₂ emissions can be significantly reduced, in line with the Climate Agreement. The government, in turn, creates the preconditions necessary to realize those plans, such as subsidies, permits and access to green energy.
Tata Steel itself submitted a Green Steel plan for this at the end of last year, after withdrawing a more ambitious steel plan. With the help of billions in state aid – Tata did not mention specific amounts – the company wants to make steel in the IJmond region based on natural gas, and later with hydrogen instead of coal. In addition, an electric furnace will be used to melt steel and scrap.
Strategic importance of the steel industry
Before the government responded to that proposal, it first wanted to obtain advice from the two committees. Because state aid to Tata is extremely sensitive: the company has come under a lot of fire in recent years because of its role as a major polluter and nuisance creator in the region.
‘This may be the largest industrial transition in the Netherlands of the 21st century’
‘I am pleased with the government’s support for our Green Steel plan and I am sure I speak on behalf of all colleagues at Tata Steel Netherlands. It is a plan in which health and climate play a prominent role. The government has indicated that it will work with us to investigate the feasibility of the plan and the accelerated reduction of health risks. We experience the positions as enormous support to investigate, together with the government and all other stakeholders, how we can accelerate the implementation of this plan. We would now like to take the next steps in shaping and implementing what is perhaps the largest industrial transition of the 21st century in the Netherlands.’
Hans van den Berg – CEO of Tata Steel Netherlands
Weijers and Blom note in their advice that it is strategically important for the autonomy of Europe that the EU is self-sufficient in the production of green steel. And that Tata, located on the North Sea, has a very good competitive position. In the future, the electricity required for green steel production will come from offshore wind farms, and the supply and delivery of ore and steel can be done efficiently via water. But the plan also shows that Tata’s economic future is shaky, because those wind turbines and cheap electricity are not there yet. And in countries such as Sweden, Norway and Spain, green energy will almost certainly be cheaper.
The report elaborates five scenarios: doing nothing, Tata’s own plan, a scenario in which the most polluting parts are tackled extra quickly, a far-reaching downsizing of the factory while retaining only electric ovens and finally the closure of the factory .
‘It cannot be the case that taxpayers contribute billions and local residents still get sick’
‘Now that the stack of reports is complete, there is no longer a day to lose for local residents. We expect that the advice of the health expert group (led by NWO chairman Marcel Levi) will be central when making the tailor-made agreements. After all, it cannot be the case that taxpayers contribute billions and local residents still become ill because of this factory, as a government you do not want to be partly responsible for that.’
Sanne Walvisch – (local residents) foundation Frisse Wind
The government has now opted for the third scenario, which is in line with the block diagram that Wijers and Blom included in their report. The scenarios are assessed against six criteria: the impact on global CO₂ emissions, the impact on local residents, the pollution for local residents, the added value for the Netherlands, economic viability, public expenditure and social support. The ‘third scenario’ scores positively on the vast majority of these points. However, the government will have to take into account an ‘additional support request’ compared to the scenario that Tata drew up itself.
Confidential figures
It was interesting that Wijers and Blom accidentally also gave the confidential figures under that heading of public expenditure during a press briefing. That was not the intention, because these figures could damage the government’s negotiating position. The accident makes it clear that the advisors estimate the costs of the green steel plan for the treasury at around 0.5 to 2 billion euros. And that the plan to accelerate this will be another 10 to 50 percent more expensive – around 2.5 billion euros.
‘This mess must stop and the polluter must pay for it’
‘The fact that the cabinet finally appears to be speaking out in favor of the option to close Kooksfabriek 2 more quickly is good news. We hope that we will now speed up the closure of this ancient and leaking factory, no later than 2025. Subsidies for Tata Steel are not taboo for us, but only for greening production and not for cleaning up pollution, as an earlier closure of Kooksfabriek 2 or the remediation of the site.’
‘It cannot be the case that taxpayers have to pay for Tata Steel’s overdue maintenance. Tata Steel has to pay for the closure of Kooksfabriek 2 out of its own pocket, they have known since the 1970s that this production facility leaks carcinogenic substances. Tata must also pay for the remediation of the site (which will cost 12 billion) itself. This mess must stop and the polluter must pay for it. This advice gives hope, but it is important that the factory quickly reduces harmful emissions to zero. With current plans, Tata Steel will not do that. Cooking factory 1 is just as dirty, but Tata wants to keep it running for at least another ten years.’
Andy Palmen – director of Greenpeace Netherlands
Perhaps even more striking are the costs that the authors anticipate for the other scenarios. Doing nothing could possibly mean (slowly beginning of) the end of the factory and result in a reorganization that could entail approximately 13 billion euros in remediation and social costs. In the event of an acute closure, another 4 billion euros could be added for the buyout of Tata.
“It is annoying that these figures have come out,” said outgoing Minister of Economic Affairs Mickey Adriaansens (VVD) on Thursday afternoon. ‘But mainly because it is now about those figures. These are just estimates – you really can’t say exactly what it will be with these kinds of amounts.’
Preservation of the factory
The cabinet has not yet formally decided on which direction it wants to take in negotiations with Tata, the minister said. But it is already clear that The Hague is committed to preserving the factory, while further sharpening its ambitions to reduce emissions and nuisance from the factory. This includes the accelerated closure of the controversial Cooking and Gas Oven 2, and covering the storage of raw materials that can be blown away by the wind.
She expects a formal position to be taken in the coming weeks. To achieve this, Adriaansens will have to consult confidentially with the House of Representatives, in order to gain support for the negotiations with Tata. Adriaansens looks forward to that conversation with the necessary confidence, despite the outgoing status of the cabinet. ‘I have urged the House so often lately to do something and especially for green and clean steel. I now see possibilities for that.’
‘You have to be careful with what could become the largest greener in the Netherlands’
‘It is a good thing that Kooksfabriek 2 has to close, which would be in two years’ time, in 2026. If necessary, this can be done even faster, in phases. Its closure takes an important sting out of the polarization among residents in their living environment.’
‘You have to be careful with the only steel factory that can now become the largest greener in the Netherlands. If the costs for the government are between 0.5 and 2 billion (taxpayers’ money), then state participation makes perfect sense. Then the government is in the driver’s seat and has a say in greening. The government must also do this to better protect the social interest to which the company contributes with its products or services.’
Roel Berghuis – former FNV trade union director at Tata Steel Netherlands
Adriaansens hopes to have an extensive one this year letter of intent sign with Tata. ‘Because haste is required.’ An important part of these agreements must be that the money that the state agrees to contribute to Tata’s transition does not disappear to the head office in India. ‘Our lawyers all see possibilities for this.’
A state share in the steel factory, as is sometimes suggested in trade union circles, is also one of those options, the minister confirmed. ‘But I’m not very enthusiastic about that in advance – the government is not exactly the best steel producer.’
Tags: Cabinet committed greening plan Tata cost treasury billion
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