Be careful that the Netherlands does not become a ‘look-away economy’ by greening industry

To lead the way in greening the industry, the Netherlands is rapidly increasing environmental requirements. Our country does not impose the same requirements on imported products. This means that Dutch industry is in danger of moving to countries where CO₂ emissions are much higher.

Grants

Since the European Union relaxed existing restrictions on state aid, Germany and France have thrown in tens of billions of euros in subsidies to prevent a similar fate for their national industries. This also threatens to destroy the level playing field in the European internal market – the driving force behind our competitive position. But this danger to Dutch industry hardly plays a role in the current election campaign.

According to the IMF, the energy transition uses 220 goods, such as electric cars and wind turbines, but also thermostats and insulation material. Europe is good at producing these goods. Last year, China’s share in global exports of these goods exploded to 34 percent, but the EU’s share also increased: from 19 percent (2019) to 23 percent last year. The US remained stuck at 13 percent.

Although the technologies (such as hydrogen factories, solar and wind farms) for which these goods are used are clean in use, emissions do occur during their production. A necessary evil, because they still save a lot of emissions over their life cycle compared to fossil alternatives.

However, the Netherlands is increasingly less prepared to use CO₂emissions on our own soil, even if this leads to a net positive result in the long term. The social climate is turning against ‘dirty’ companies such as Chemours or Tata, but closing the latter does not in itself lead to a decrease in demand for steel.

Move

In essence, the Netherlands moves emissions and pollution to countries where environmental requirements and CO₂ taxes are often lower. In this way, our economy becomes a ‘look-away economy’, where the parts of the chain that we do not consider comfortable are outsourced to other countries. In this way we lose control over emissions in the chain and we make ourselves geopolitically vulnerable.

China and the US do the opposite with big money. They try to attract companies and stimulate the growth of domestic industry. China has done the same trick several times, by shielding its home market until a large scale of production has been achieved with the help of many billions in government subsidies. Exports are then increased at a breakneck pace, until industries in other countries fail. Ten years ago this meant the end of European solar panels and now the European electric car and wind industries are under pressure – while demand increases. The US copied this model.

To resist this, the high standards we set in our own market must also apply to products we import. In that respect, the Carbon Border Adjustment Mechanism (CBAM) is a step in the right direction. This new EU law obliges importers of, for example, cement or steel, to emit the same amount of CO from 2026_2-to pay taxes as companies that produce these goods within Europe.

But this law does not initially apply to high-quality industrial products such as cars – and other forms of pollution remain out of the picture. Until the holes in the CBAM are closed, Brussels and The Hague must be careful that stricter environmental requirements do not still lead to a leakage effect.

Fist

In addition, European countries follow their own path too much to be able to make a stand against Chinese and American mercantilism (a policy of more exports, less imports, ed.) . An example of better policy is the recently announced subsidy scheme for the purchase of electric cars by France. This subsidy is only available for vehicles with low emissions in the production chain. This makes producing cars locally more attractive than importing cars produced with coal power from China, and internal European competition is not at risk.

If the EU were to adopt this policy, European car manufacturers throughout the European market would be better protected against heavily subsidized Chinese cars.

There are plenty of privateers on the coast who are happy to take over strategic parts of our industry. The Netherlands thus runs the risk of creating a look-alike economy, in which we not only lose control over our industry chain, but also global CO₂increase emissions. Our politicians hardly talk about this during the election campaign, but a new cabinet must face this.

To make our economy more sustainable, higher environmental requirements are essential. It is important to outline a realistic timeline so that the industry can adapt to these new requirements. It is also important not to disadvantage domestic production. For the Netherlands, as an industrial river delta and port of Europe, all roads lead to Brussels.