Design of a policy framework in support of the Transformation of the Dutch Industry

In 2022 the Dutch Energy System used some 2700 PJ of energy. Some 86% of its input was natural gas, crude oil and coal. The other 14% were renewables. A network of power-generation units, refineries and petrochemical complexes converted fossil resources into heat (700 PJ), power (400 PJ), transportation fuels (500 PJ) and chemicals (400 PJ). Some 700 PJ were lost due to conversion and transport. CO2 emissions were 160 Mt in 2022 of which 65 Mt by industry and 30 Mt by mobility. Transformation of this system into a Net Zero CO2 system calls for replacement of fossil resources by renewable heat, power and carbon. Decarbonisation of heat & power for residential and mobility is well underway at the moment. However, decarbonisation of industry and recarbonisation of shipping & aviation fuels, as well as recarbonisation of feeds for chemicals, is hampering progress. This paper concludes that current policies, predominantly based on trading CO2 emission certificates (ETS) is insufficient for industry to justify investment decisions. A carbon tax of 100 �/t CO2 on top of ETS prices (currently some 70 �/t CO2) is still insufficient for viable business cases. This paper shows that a combination of mandated production volumes for renewable fuels supported by opex subsidies, investors� willingness to accept lower costs of capital, off-takers� willingness to pay higher prices for green products and producers� willingness to accept lower returns on their investment, may drive industry towards viable business cases. Financial support comes from government through their return of extra CO2 tax income and income from sales of ETS certificates to producers, off-takers and investors (risk mitigation assurances). This paper shows how QuoMare�s TDES (Transformation of the Dutch Energy System) is deployed to outline a policy framework that provides robust incentives to industry to invest in decarbonisation and recarbonisation projects.