Abstract of advisory report: Towards an Energy Agreement for Sustainable Growth. (Naar een Energieakkoord voor duurzame groei, 12/07) 1.

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1 Abstract of advisory report: Towards an Energy Agreement for Sustainable Growth (Naar een Energieakkoord voor duurzame groei, 12/07) 1. Introduction This advisory report is the Social and Economic Council s response to the Rutte Government s request for advice on energy and the economy, submitted on 5 June The request focuses in particular on the opportunities and threats for Dutch trade and industry arising from climate change, the rising cost of energy, the growing demand for fossil fuels worldwide, and increasing global competition. The Council considers the election of a new Government the ideal time to revive efforts to develop a robust, future-proof energy and climate policy. Such a policy should be consistent over the longer term and respond to major issues associated with energy and climate change and the opportunities and threats arising from those issues for businesses, institutions (schools, hospitals, housing corporations), and individual citizens. The challenges and threats are well known and multi-dimensional, touching on such matters as the ecology (climate change and environmental pollution; the UN s 2 degrees Celsius limit almost unfeasible), the economy (innovation and export opportunities for clean-tech businesses; high environmental and energy-related costs for Dutch companies; impact on international competitiveness of businesses; less reliable electricity supply; a sustainable economy), society (employment prospects; quality of work; income and purchasing power effects), community (a change in consumer and business behaviour; citizens generating their own energy), infrastructure (new balance between conventional and renewable sources of energy; more interconnectedness) and geopolitics (dependence on imports from unstable regions; slow decision-making with respect to international climate policy). There is broad support for reviving these efforts among political representatives, businesses, and civil society organisations. Their backing has persuaded those in political circles to call for an agreement that would result in a sustainable system of energy management by The agreement aims to transcend and connect the diverging interests of the many stakeholders, in the knowledge that adopting a longterm perspective means placing the common good far above the separate stakeholders individual interests. The Council is offering itself as a platform for arriving at an Energy Agreement for Sustainable Growth that has the broad support of the parties that make up the Council, 1 the participating nature conservation and environmental protection organisations, and other relevant stakeholders. 1 Employers' representatives, union representatives and independent experts.

2 2 The Council is convinced that plans to make dramatic, long-term changes to energy management and the economy will only succeed if both political parties and the relevant civil society organisations commit wholeheartedly to this course of action and remain committed as time passes. Commitment and continuity are basic requirements; success depends on achieving both. 2. Why now? The ability to adapt our energy management system to rapidly changing circumstances at home and abroad is vital to the sustainability of the Netherlands economy, job opportunities for the Dutch labour force, and, as a consequence, the future prosperity of the Dutch population. As the Council previously observed, one of the main problems in the Netherlands energy and climate policy is a lack of continuity, leading in turn to uncertainty when stakeholders are making investment decisions. Given that major investments will be required in the years ahead to facilitate a smooth transition to reliable, affordable and clean energy management, consistent and coherent policy is absolutely vital. Businesses, institutions, and citizens will be more likely to invest if they have the necessary assurances (because they will have a better notion of what energy is going to cost them in future). After all, many of the investments concerned are quite large and have long depreciation periods. Uncertainty concerning the investment climate will slow the process of transition, with obvious implications: it will obstruct changes leading to a low-carbon economy, put pressure on the competitiveness of energy-intensive industry (and thus on employment), make the Netherlands more dependent on energy imported from unstable regions, and limit Dutch companies opportunities in rapidly growing clean-tech markets. It will also frustrate the drive that has become palpable in society in businesses, in local government, in civil society organisations, and among citizens to push energy management in a sustainable direction. The context is also important in that there are many different interests involved, which have so far blocked the path to the common good in the Netherlands. As a result, there is too little synergy between the many initiatives that have been launched in society, by individual businesses, and in government policy. Reviving these efforts means sharing the same perspective while taking the long view. 3. Faster transition required Emissions of greenhouse gases and other polluting substances must be drastically reduced in the decades ahead. For example, within the context of global climate agreements the European Union has undertaken to reduce its overall CO 2 emissions in 2050 to 80-95% below 1990 levels. Major efforts will also be needed in the medium term to achieve the targets set for 2020 with respect to CO 2 emissions, energy conservation and renewable sources of energy. 2 2 The Dutch targets are derived from the EU s targets for 2020: - 20% reduction in greenhouse gas emissions below 1990 levels (this could rise to 30% if an international climate agreement is concluded). For the Netherlands, a 16% reduction in emissions in non-ets sectors and a 21% reduction in ETS sectors (ETS = Emissions Trading System). - 20% of all energy consumption from renewable sources, e.g. wind energy and solar energy; the target for the Netherlands is 14%. - An annual savings on energy consumption of 1.5% arising from the Energy Efficiency Directive, which was amended in 2012.

3 3 With wind energy and solar energy accounting for a growing share of renewable sources, energy management systems must be more flexible and closely coordinated to accommodate larger fluctuations in supply. In the case of biomass, the challenge lies in preventing negative sustainability effects elsewhere (food production being replaced by energy production; destruction of biodiversity; poor local working conditions), and in using biomass first and foremost to produce goods that generate the most added value. 3 At the same time, the transition process itself requires painstaking adjustments to be made to the Dutch economy. That economy depends to a large extent on the energy, logistics, chemicals, base metals and agro sectors, which in turn depend heavily on having access to large quantities of feedstock and energy at internationally competitive prices. Relying on relatively expensive energy from unstable regions makes our society especially vulnerable, particularly now that competing regions such as Asia and the United States have access to larger energy reserves at lower prices. The adjustments that businesses must make require technological innovation, different work processes and methods, and changes in employee effort, commitment and qualifications. The transition to sustainable energy management and a low-carbon economy is well under way elsewhere, and in many countries has reached the point of no return. A country such as the Netherlands a trading nation with energy-intensive industries and vast stores of knowledge in numerous energy-related areas should be able to concentrate its efforts in order to anticipate the opportunities and threats that accompany this process. The necessity of doing so and of keying into dynamic forces in society is even greater given that public finances will continue to be under severe pressure in the decades ahead. The transition will generate economic opportunities both in the Netherlands and internationally. With the building trade currently under heavy pressure, for example, it would be shrewd for the Netherlands to exploit the many opportunities for energy and cost savings in the built environment. That would not only result in lower energy bills and more environmental benefits, but also have a positive impact on employment. Jobs will be saved in the building trade and allied industries, and opportunities will arise for new, good quality jobs. Satisfactory educational and training programmes will be needed to ensure that existing employees acquire the new knowledge and skills required and to prepare new employees for their future jobs. A clever, coherent, and predictable approach that also keys into the many local initiatives will help clear a path out of the crisis. Government can also contribute as launching customer. Huge opportunities await Dutch companies in the rapidly growing global marketplace for clean energy technologies. The global clean-tech sector has experienced an annual growth of 10% or more in recent years. The Netherlands can also benefit from the key role that gas is playing in the transition to sustainable energy management. The Netherlands has acquired extensive knowledge and experience in the production, trade and transport of natural gas. There are opportunities to be had here. After all, in addition to its vast knowledge, the Netherlands also has a growing number of promising companies active in this sector. Here too, close interaction between government, the relevant industries, and other stakeholders will give Dutch businesses ample opportunity to seize an advantageous position in growth markets and create new economic activity and employment. 3 SER (2010) More chemistry between green and growth: The opportunities and dilemmas of a biobased economy (2010/05 E).

4 4 In short, there are opportunities at many different levels: for businesses, in the form of new economic activity in existing and growth sectors; for employees, in the form of jobs (new good quality jobs or existing jobs in new settings); and for citizens, in the opportunity to control their own energy management. 4. Towards an Energy Agreement for Sustainable Growth The Council observes that there is a pressing need for consistent and coherent energy and climate policy that has broad support and will help shape and provide guidelines for long-term decision-making. Consistency and coherence should give investors the assurances they need, allowing targets to be achieved comprehensively in an efficient and effective manner. Where policy does not meet these criteria, adjustments remain necessary. The long-term policy has been envisaged at different orders of scale (national, European and global) to serve as a compass for defining a durable framework and rules and to anticipate opportunities and threats for the Netherlands. This framework will also create leeway for the drive that has become palpable in society in businesses, in local government, in civil society organisations, and among citizens with respect to energy and the climate. For example, a growing number of traditional energy consumers wish to invest in generating energy themselves and thus become energy producers. Only a long-term policy that keys into this drive can offer the necessary leeway for this to happen. The international framework is of immense importance in this respect, for one thing because the energy and climate targets are firmly embedded in EU policy and because the Dutch energy system is part of various international systems, including the northwest European energy market. Another relevant factor is the close relationship between Dutch trade and industry and the international economy. It is against this background that the Council advises the new Government to work on achieving an Energy Agreement for Sustainable Growth that has broad support. That agreement should not be free of obligation, but rather prescribe instruments that actually change the course of energy and climate policy. The Council would be gratified to serve as a platform and thus make an active contribution to achieving such an agreement. It would like to involve all the relevant stakeholders in society in that effort. The Energy Agreement for Sustainable Growth should set out a policy vision, state the basic principles, roles, responsibilities and powers, offer instruments to elicit the desired changes in behaviour (appropriate incentives structure, predictability of measures), and make proposals for a fair apportionment of costs and benefits, bearing in mind transitional processes and access to energy for low-income groups. The Energy Agreement for Sustainable Growth should set out conclusions concerning at least the following subjects: 1. Policy continuity: What policy will be continued? 2. How can that policy be differentiated and tailored to the following orders of scale: National policy for national sectors (including energy savings in the built environment, local generation of energy, and the modernisation of the energy system ( smart grid ), influencing consumer behaviour (energy efficient, sustainable consumption), employment prospects (number of jobs and quality of work, availability of qualified employees, training facilities for new jobs in the clean-tech sectors, employee retraining and refresher training in the transition to green jobs ).

5 5 Europe-related policy for the electricity-producing sectors, for example by harmonising energy and climate policy as much as possible at European level, by promoting coordination on the northwest European electricity market, and by supporting the ETS (Emissions Trading System) as an instrument. The policy should allow for the way in which the Dutch energy system is intertwined with international energy markets, for example for natural gas. Policy focusing on pre-competition innovations, on the adjustment processes of international (energy-intensive) industry (e.g. via the bio-based economy) and the clean-tech sector, and on retaining access to competitive energy prices for industries that compete internationally and for the aviation sector. The Council would like to have concluded the Energy Agreement for Sustainable Growth no later than six months after the new Government enters office. The Agreement must have the backing of the social partners, the participating nature conservation and environmental protection organisations, and other relevant stakeholders. A commitment to the Agreement should be voluntary but by no means free of obligation. Those involved must commit themselves each within its own scope of responsibility to the agreements to be made, in so far as they concern areas in which they can exercise an influence. One important criterion for participating in the Agreement is that the relevant party must be widely acknowledged as a representative organisation. This will be a long-term commitment, both political and social. Speed is advised. After all, today s investments will largely determine how 2050 is going to turn out. Social and Economic Council. All rights reserved. Material may be quoted, providing the source is mentioned. Translation: Balance, Maastricht/Amsterdam