Pace of decline in greenhouse gas emissions falls short of climate goals

Europe has set ambitious targets to reduce greenhouse gas emissions faster. According to the European Commission's (EC) Green Deal, EU countries must achieve CO2 reductions of 55% of 1990 emission levels by 2030. By 2050, Europe should then be climate neutral. In the Netherlands, however, the current government aims for 60% emission reduction compared to the 1990 level. Only increased public and private sustainable investments combined with the accelerated deployment of clean energy technologies and, above all, policy initiatives to both stimulate and support the private sector can start reducing greenhouse gas (GHG) emissions at a faster pace. An stepping up of in climate measures is needed because the climate targets through 2050 will not be met at the current pace in reducing GHG emissions.

Reduced emissions

The European Green Deal's overarching goal is climate neutrality by 2050. This is also the minimum ambition of the Dutch government. But to achieve this goal, much climate action is still needed in various sectors of the Dutch economy. Every part of the Dutch economy will have to contribute to the climate target. According to the first provisional emission figures from CBS and RIVM/Emissions Registration (based on regulations from the UN Intergovernmental Panel on Climate Change, IPCC), GHG emissions in the Netherlands from all climate sectors combined decreased by 4% in the first quarter of 2023 compared to the same period in 2022. With this new figure, a downward trend in total GHG emissions is visible.

Reduced natural gas consumption due to high gas prices have notably contributed to the decrease in GHG emissions. This is especially the case in agriculture (greenhouse horticulture), industry (in making food, paper, metal, building materials, chemical and also petroleum products) and in the case of households (heating in built environment) there has been a rationalisation in gas consumption. Most climate sectors showed annualised reductions in the first quarter of 2023. The sharpest reduction took place in the built environment (-12%) and industry (-8%), followed by agriculture (-3%) and electricity (-1%). The mobility sector is the only sector to record an increase in GHG emissions in the first quarter of 2023, of as much as 10% year-on-year. This puts the sector's emissions back at a similar level to pre-corona pandemic emissions. Compared to the other climate sectors, the emissions reduction trend in the mobility sector most disappointing. In this sector, the downward trend is considerably weaker. Road transport is the biggest polluter in the mobility sector. It is responsible for about 95% of the mobility sector's total emissions. Accelerating electrification in the mobility sector still faces obstacles, not only in passenger transport, but also for commercial vehicles. Affordability, range (especially for freight transport), refuelling infrastructure and charging infrastructure are the biggest challenges. See also our analysis here.

The corona pandemic had a disruptive impact on all climate sectors. But there is a difference between the emission trends of mobility and the other sectors. While GHG emissions decreased in the mobility sector during the corona pandemic (due to fewer transport movements because of lockdowns), GHG emissions increased in the other sectors. After the corona pandemic, GHG emissions in most sectors (except the mobility sector) starting to fall again. From this it becomes clear that the mobility sector is among the most hard-to-abate sector in emissions.

Emissions by activities

Within many of the economic sectors of the Netherlands, decarbonisation is now well underway. While in most sectors, there is a lot of work to do, for a small number of other sectors, the emission reduction path towards 2030 is less distant. The matrix below shows the extent to which sectors of the Dutch economy need to reduce their emissions. Here, the size of the area represents the share of the sector in total GHG emissions. And when the area is more red, this indicates that the emission reduction challenge is high from current levels towards 2030 (on the basis of a 55% reduction compared to 1990 levels). Unfortunately, only a limited amount of (sub)sector have a green colour.

The sectors responsible for the most GHG emissions may face a greater challenge to decarbonise their processes and products. Fortunately, most sectors have many low carbon technologies available. But the fact remains that a transition to a low-carbon way of working within all sectors is often complex and many companies within sectors still face obstacles in the implementation of low carbon technologies.

The Long & Winding net-zero Road

Several exogenous shocks have strongly influenced the GHG reduction trend in recent years. Economic downturns (such as the internet bubble in 1999 and the major financial crisis in 2008-2009) and also economic prosperity have positively and negatively impacted the GHG emissions trends, respectively.

However, the Covid-19 shock (2020) and the energy crisis due to the war in Ukraine (2022) had a much stronger impact on the GHG emission trend. The 2020 GHG reduction was 8% year-on-year, while the 2022 GHG reduction was 9%. The strong influence of exogenous shocks makes it difficult to calculate and assess the true annual reduction potential of the Dutch economy.

Including all shocks over the years, the long-term average of GHG emissions comes to 0.7% year-on-year. This is the average for the period 1991 to 2021. In 2020, however, an estimation method was developed to produce IPCC quarterly figures. These are used, among others, within the Dutch Climate Agreement, and conform to the internationally established IPCC rules. Using this quarterly approach, the average of GHG reductions over the past 13 quarters comes out to 5.0% year-on-year. These quarters include, however, the sharp shocks of Covid-19 and the energy crisis, while the long term 0.7%-average does not. That way, the 0.7%-average is the conservative projection, while the 5.0%-average is a more extreme projection.

If we extend the line from these two extreme reduction paths to 2030, it is clear that the pace of GHG reductions falls short of the set climate goals. Even with a GHG reduction of 5.0% per year (orange line in right-hand-side figure on previous page), the gap in 2030 is still 16% and with a reduction of only 0.7% per year (blue line), it is 41%. For the years after 2030, the government has also set ambitious targets. By 2035, greenhouse gas emissions must be 70% below 1990 levels and by 2040, 80%. Ultimately, emission reductions should be completed by 2050, with greenhouse gas emissions then ideally at 95% of 1990 levels. In both cases - with the reduction of 0.7% per year and 5.0% per year - these targets will also not be met either and the 2050 climate target will be missed by 74% and 92% respectively. So there is still a lot to be done to get GHG reductions going. It means, among other things, more incentive climate policies and a very robust scaling up of public and private sustainable investments, with households also needing to be sustainably incentivised. An earlier analysis by ABN AMRO shows that a successful transition to net zero emissions would require investments more than double those of the previous decade. The relevant research further indicates that the additional annual investment needs could be in the order of about EUR 15 billion per year (which is about 1.5% of GDP). Investment needs also remain high over an extended period.