Impacts on Dutch industry from sharpening the EU CO2 target from -20 to -30%

This study presents an analysis into the consequences of the costs for industry in the Netherlands of moving within the EU from a CO2 reduction target of -20 to -30%. Three scenarios have been formulated with respect to the input of CDM and the associated price developments in the EU ETS market. In these scenarios the impacts of the financial crisis have been taken into account. These three scenarios have been analyzed with respect to the potential costs for industry of complying with EU ETS. We distinguished both the direct costs of complying with EU ETS and the costs of increased electricity-inputs. It appears that the highest additional cost increases occur for the cement industry, the aluminum industry and the inorganic chemicals. These sectors have little opportunities to reduce emissions or electricity demand. The aluminium and inorganic chemical industry mainly suffer from the higher electricity prices, while the cement sector will be a net buyer of allowances. Some sectors, e.g. refineries and fertilizer, may profit from the more strict emission regime as they have opportunities to reduce their emissions at lower costs and become net sellers of emission credits. The costs presented here are gross cost price increases. However, part of these costs will be passed on to the consumers – this has not been taken into account in this study. Earlier research indicated that about half of the additional costs of EU ETS may be passed on to the consumers. .

The total sum of costs were estimated at 0.4 billion annually in 2020 under the -20% target (less than 0.1% of GDP). For the target of -30% and no additional use of CDM, these costs will increase to about 0.2% of GDP.  Hence additional costs of more ambitious targets are estimated to be low.