Economists Willem Vermeend and Rick van der Ploeg say a carbon tax is inevitable to save a flawed climate agreement.

In December 2015 195 countries and the EU signed up to the Paris climate agreement, committing themselves to limit global warming to less than 2 degrees Celsius by the end of the century compared to 1990 levels.

To achieve this the global net total of emissions of greenhouse gases, and carbon dioxide in particular, would have to be practically zero in the second half of this century. China (30%), the United States (15%) and the EU (10%) are responsible for over half of current global CO2 emissions.

The Dutch emissions level is around 0.4% but this country’s per capita emissions rate is higher than the European average. The Paris agreement also stipulated that it is up to the individual countries themselves to choose which measures they implement to achieve the climate goals.

Recent calculations have shown that CO2 emissions are still increasing and that the present climate policy will do nothing to bring climate goals closer to being realised. By the end of the century global temperatures will have risen by well over 3 degrees Celsius.

Wake up call ignored

During the climate conference in Poland in December 2018 it became clear that this alarming message has not had much of an impact. There is even a worldwide trend to put climate policy on the back burner, often as a result of pressure from fast-growing populist parties.

This trend looks set to continue. With most countries facing lower economic growth the focus will be on promoting business and increasing consumer purchasing power. And that means that taxes as an incentive to limit CO2 emissions will fall by the wayside.

The Netherlands stands out

In many countries the enthusiasm for climate policies is on the wane. The current cabinet is steering a different course and wants this small country, whose emissions are negligible on a global scale, to become the world champion of climate change busting measures.

That is why the Netherlands has to reduce CO2 emissions faster than other countries, while taking the extra costs this will pile on businesses and private individuals in its stride.

The Dutch way of arriving at a national climate agreement left much to be desired. It united a motley crew of representatives from the world of business, environmental organisations, unions, employers and experts each with their own fish to fry to negotiate a deal.

Not surprisingly, this led to a large number of extremely expensive compromises which are not going to do the climate any good. The same goes for the 600 climate measures included in the failed agreement offered to the cabinet last year. The Telegraaf rightly characterised this approach as ‘ground-breakingly stupid’.

No broad support

Anyone courageous enough to plough their way through the polder accord will be struck by its unbounded bureaucracy, the size of the government subsidies and the lack of attention to the effectiveness and execution of the measures.

On top of that, it is the people on lower incomes who will be footing the bill while companies, among which are some of  the biggest polluters, escape financially unscathed. In the last week protest against the agreement has been mounting in and outside the coalition while voters have expressed their disapproval in the polls.

Dutch influence on global warming is minimal. But Rutte’s attempt to head the international climate effort could be a wise move after all. It gives us a chance to fulfill our international and moral obligations and gainfully export valuable knowledge and experience in the area of energy transition.

However, in order to take the lead internationally the government needs a different kind of agreement and the kind of broad national support a compromise agreement will not bring.

Revolutionary technology

Instead of the multi-partied approach a new climate policy will have to be based on hard criteria, such as efficiency, efficacy and climate profit at the lowest price. This policy, which will stretch over a number of decades, must take into account revolutionary technological developments which lead to tools that will give us cheaper and more effective ways of reducing CO2.

The compromise approach is based on the old economy. The new economy is dominated by digitisation and new technologies, such as artificial intelligence, the internet of things, big data analyses, nano tech and 3D printing, which will considerably accelerate energy transition and reduce its costs.

The current climate agreement is promoting a bureaucratic and expensive approach to banning gas from homes and public buildings in the shape of heat pumps. Countries like Japan and the UK are opting for gas and additional hydrogen technologies. The UK is adapting the gas network for hydrogen transport, a relatively cheap option which the Netherlands would do well to explore.

Digitisation

At the heart of the cabinet’s climate policy must lie digitisation, new technologies and extra R&D in these areas. This echoes the message in The Exponential Climate Action Roadmap, an international report in which experts claim that digitisation technology and other new technologies can reduce the worldwide emission of CO2 by about 50% by 2030.

The implementation of technological innovations and so-called breakthrough technology in subsequent years would make it possible to realise the Paris climate goals.

If the cabinet stimulates digitisation and innovative technologies, it could boost energy transition, creating not only sustainable economic growth and new jobs but also a greener economy and a healthier environment. This would make climate policy inspiring an reduce the financial burden for citizens.

Green perspective

We have said it before: businesses should pay a tax on CO2. This would create an incentive for entrepreneurs to use new technologies to improve climate policy.

Potential loss of competitiveness could be compensated for by using the revenue for lowering the financial burden on businesses, for instance by reducing employer contributions.

Without such a tax, which will see businesses contribute their fair share, sufficient social support for climate policy will be very difficult to achieve.

This column was first published in the Telegraaf