The election results and their climate implications

ABN AMRO's Chief Economist Sandra Phlippen and Climate Economist Loudina Erasmus took a closer look at the election programmes and the election results, and wrote the report "The election results and their climate implications".

Phlippen and Erasmus observe a coalition process of parties that vary in climate ambition between 49% and 60% emission reduction by 2030 is underway. Whether via the left or the right lane, final policy may very likely end up with a reduction of close to 55%, the new EU reduction goal.

"Achieving this climate ambition does require a set of new measures", according to Erasmus. "In addition to taxes think of investments, subsidies and other regulations. A report by the Van Geest committee that provides options that lead to a 55% reduction in emissions is a guide in this respect."

Economists worth their salt should be asking (and answering) the question: who will be paying for this? Sandra Phlippen sees two ways of doing this: "The cost of public investment and subsidies to individuals and companies to reduce their emissions must be financed - either by public debt or by taxes on households and businesses.”

Dutch climate plans are financed roughly 55% by households and 45% by companies according to the last estimates from CE Delft. A currently attractive alternative to taxes is the issuance of government debt, with investors lining up for it.

Phlippen continues: "If the Stability and Growth Pact - which has been put on hold due to the Corona pandemic - were to make extra green debt financing possible, ambitious climate targets could count on more support. Climate change is by definition a cross-generational issue. Negative externalities are passed on from one generation to the next. The debt burden for the next generation will be small (especially with low current interest rates) compared to the economic damage of not taking policy measures."

Phlippen and Erasmus emphasises one thing: "The new government faces a huge task. The next four years will determine how the Netherlands is positioned on the international climate agenda and how adequately we, as a country, will respond to the biggest challenge for the future."

The complete report can be found on ABN AMRO Insights: #Stembuzz - The Dutch election result and its climate implications