What should be done to ensure that sustainable development objectives are achieved more cost effectively?
Climate change policy has imposed higher energy taxes on small energy consumers, albeit recycling the extra revenues to them, while relying more extensively on voluntary agreements with large companies. The authorities should harmonise abatement costs across the economy by changing the regulatory energy tax to an explicit carbon tax for energy users not included in the EU’s trading scheme, with the rate set at the level of the expected price of an emission permit. This would minimise the economic costs of reducing GHG emissions, although increases in revenues from other sources would be required to offset the loss of revenue from carbon taxes. Support offered to renewable energy and combined heat and power should not exceed the carbon tax rate.
The regulatory energy tax
Source: Ministry of Finance (2003).
The authorities have been innovative in introducing economic instruments to address water pollution from agriculture. However, they should seek to reduce the significant costs of implementing the MINAS scheme to reduce such pollution. In the area of natural resource management, protection from saltwater intrusion due to over-exploitation of aquifers is particularly important owing to the low-lying nature of much of the country. Given this threat, the authorities should ensure that all abstractions of groundwater, including for agriculture, incur the groundwater abstraction charges levied by the central and provincial governments and reflect the full cost of the associated externalities, unless the administrative costs outweigh the benefits. Management of the Netherlands’ substantial hydrocarbon reserves is also an important natural resources issue. In this respect, the government should evaluate the net present value of different resource management approaches to assess whether or not the “small fields” policy, which favours the production of high-cost reserves from small fields before low-cost reserves from the main Groningen field, should be maintained in the future.
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