Thematic report: Investment climate for energy-intensive industries

Lack of vision is also a choice

The Netherlands has long been considered a good location for energy-intensive industry. Dutch greenhouse horticulture, for instance, is very extensive, several industrial clusters have been established, and the port of Rotterdam has a great attraction for chemicals and refineries, among others. This industrial capacity – with its high labour productivity – is of considerable importance for the Dutch economy in a broad sense. Not only because of its large indirect employment, but also because it forms the basis for the manufacturing industry, which makes products such as windmills and fertilisers. These products make an important contribution to the strategic autonomy of the Netherlands and Europe, making basic industry important for, for instance, the success of the energy transition and stability in the food supply.

Recently, we see a series of developments negatively affecting the Netherlands’ favourable business climate, especially for energy-intensive industries. Dutch companies, as in the rest of Europe, are facing high gas and electricity prices due to the sanctions introduced after the Russian invasion of Ukraine. This is often as much as two to three times what US companies pay. While in our neighbouring countries the government tries to accommodate these sectors with tax breaks, the Dutch government has actually decided to make gas and electricity more expensive for large consumers with some measures. The Dutch government has also shown with varying policies in recent years that it does not have a consistent long-term vision of where it wants to go with the industry. Some measures are at odds with others. As a result, the energy-intensive industry does not really know where it stands. This leads to headquarters abroad postponing investment decisions or moving to locations outside the Netherlands.

Where the Netherlands is becoming less and less attractive for industrial production compared to its neighbours, the same is true for Europe as a whole. Besides affordability, energy supply and/or security of supply is surrounded by increasing risks for European companies. Europe is almost entirely dependent on imports for almost all fuels. In addition, other industrial powers have extensive government stimulus programmes, such as the Inflation Reduction Act (IRA) in the United States (US) and similar programmes in China. The European Union (EU) is a lot less generous with such state aid and instead mainly comes up with obligations for companies (such as CSDD and CSRD), which require more administration and controls and thus create higher costs. This fits into a broader picture in Europe, where (fossil) energy-intensive companies slowly but surely risk losing their social licence-to-operate. The focus here is strongly on climate policy, with politicians giving affordability, availability, and strategic independence a lower priority than in other parts of the world.

In this report, we look at recent developments and describe the reasons for the changing investment climate. This overview is necessary to arrive at the right strategic choices for the benefit of the Dutch investment climate. For the industry, but perhaps also for business in general. Not having a long-term vision is also a choice, but one with potentially major consequences.

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