Cabinet is committed to a greening plan for Tata, which could cost the treasury up to 2.5 billion

With this announcement, the government is responding to advice on possible future scenarios for the factory on Thursday. That advice, written by Hans Wijers (former minister and former Akzo CEO) and Frans Blom (former boss of the Boston Consulting Group), was sent to the House of Representatives on Thursday afternoon. The government had asked for it as a tool for a billion-dollar deal that it wants to conclude during the course of this year for the greening of the steel factory. The House of Representatives previously also received a report on the health requirements that the cabinet should impose on state aid for Tata.

The steel factory in IJmuiden is the largest CO2 emitter in the Netherlands, accounting for 6 percent of total Dutch emissions. Tata is therefore at the top of the list of companies with which the government wants to make so-called ‘customized agreements’. In the report, Wijers and Blom investigate the advantages and disadvantages of various ‘sustainability routes’.

In these deals, the companies work out how they can adapt their production processes. This can significantly reduce CO2 emissions, in line with the Climate Agreement. The government promises to provide the preconditions necessary to realize these plans, such as subsidies, permits and access to green energy.

Tata Steel itself submitted a ‘Green Steel Plan’ 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

In their report, Weijers and Blom focus on the economic, social and sustainability considerations that are important to the cabinet in the tailor-made agreements. They develop five scenarios: one in which the state would do nothing (costs for the government: possibly up to 12 billion euros due to remediation, plus a subsidy application from Tata, to which the company is entitled; Tata’s own plan (0 .5-2 billion euros); one in which the most polluting parts of the factory are closed extra quickly (10 to 50 percent additional costs on top of the Tata plan); an alternative plan in which Tata downsizes much further and only works with electric ovens; and finally the closure of the factory (buyout, remediation and social costs: 17 billion).

The government has now opted for the third scenario, thus responding to what Wijers and Blom write about the strategic importance of Tata. They start their advice by asking whether it is actually necessary to keep a steel industry afloat in the Netherlands. Wijers and Blom argue that the European economy is highly dependent on steel and that Europe now imports more steel than it exports. Especially given the geopolitical tensions in the world, it is desirable that Europe is able to make its own steel, according to Wijers and Blom.

According to them, this is also better for the climate. Imported steel often has a larger carbon footprint than European steel, especially compared to Tata’s relatively energy-efficient steel.

Tata is strategically well located, the report states: on the North Sea, where ore can easily be supplied, and with a fast connection to Germany. In addition, the Netherlands has major plans to expand offshore wind farms. This electricity can come directly onto land at the steel factory and be used in the production process.

At the same time, the report shows how many uncertainties there are for Tata’s earning capacity in the future. The price of green energy is highly dependent on the success of the offshore wind farms. Moreover, the costs of expanding the electricity grid in the Netherlands are relatively high. Sweden and Spain, where there are also steel factories, in principle have access to cheaper sustainably generated electricity.

In any case, Tata now provides the economy with a lot of money and jobs, the researchers emphasize. The factory employs 9,000 people and many of them have jobs thanks to Tata. Although the researchers also acknowledge that a large proportion of those people would have no trouble finding a new job in the current tight labor market. And that the space that would become available if Tata disappears also has great economic value.

No ‘best case scenario’

The report does not objectively label any of the five scenarios examined as the best. That is ultimately a political weighing of the arguments, Wijers and Blom write. Yet they do massage their readers to the conclusion that the middle scenario has the most advantages. The government follows that conclusion.

In Wijers and Blom’s scenario, Tata’s steel plan is adopted, but the most polluting coke gas plant is closed three years earlier than currently planned. In addition, the mountains should be covered with dust and debris even faster.

In a block diagram with considerations (CO2, environmental pollution, added value, viability, public costs, support), that scenario scores the most deep green colored boxes. The only caveat is that government expenditure for this plan will be higher than Tata’s greening plan itself. Closing the factory has an unambiguously positive outcome in one area: clean air for local residents.

Advice on health impact on local residents

In addition to the advice from Wijers and Blom, the cabinet also had a report drawn up by a committee led by NWO chairman Marcel Levi. This was already sent to Parliament at the end of February. It discusses the health requirements that should be attached to government support.

Levi concludes that the health impact of the steel factory is probably greater than the RIVM assumes. According to him, a faster closure of the most polluted factory parts is desirable. His committee also believes that there should be better and more independently determined measurements of pollution and nuisance caused by the factory.