Daniela Glocker
OECD
Nicolas Gonne
OECD
OECD Economic Surveys: Netherlands 2025
Abstract
Current climate policies are insufficient to achieve the green transition by 2050. Emission reductions remain below target in most sectors, while severe grid congestion hinders electrification and jeopardises energy security. At the same time, hazards from rising water and increasingly frequent extreme weather events are high. Urgent action is needed to meet 2030 climate targets, particularly by phasing out implicit fossil fuel support, accelerating the electrification of transport and heat generation, and expanding grid capacity and flexibility. Ensuring a stable and predictable policy path is critical to unlock long-term private investments in the energy transition. Broadening adaptation measures beyond water resilience to address heat stress, drought, and financial risks from climate change is key to reducing long-term economic costs, by strengthening the national adaptation strategy and clarifying risk-sharing between the government and the private sector.
The Netherlands has achieved significant progress towards the green transition. Economic growth has decoupled from greenhouse gas (GHG) emissions in the mid-1990s (Figure 2.1, Panel A), as well as from all major pollutants and waste generation, so that the Dutch economy’s emission intensity has fallen significantly from relatively high levels (Figure 2.1, Panel B). Moreover, the country has been pushing forward an ambitious climate and energy policy agenda, as reflected in the 2019 Climate Act, which sets a GHG emission reduction target of 55% by 2030 compared to 1990 levels and an obligation to reach net zero by 2050. The national Climate Plan, updated every five years, guides implementation by setting indicative sectoral targets and policies over a ten-year horizon. The Netherlands is also subject to EU legislation regarding climate and energy objectives, including 2030 targets for GHG emissions reductions, renewable energy, and energy efficiency. Finally, the Netherlands has continued updating its National Adaptation Strategy regularly, building on a storied experience in water resilience and management, as well as on the first climate risk assessment by the government’s environmental agency (PBL, 2024[1]).
Continuing efforts to both mitigate and adapt to climate change remains a pressing need. Environmental pressures are particularly acute in the Netherlands, given high population density and the country’s position as a major transportation and logistics hub. Per capita GHG emissions remain among the highest in the European Union from the production perspective (Eurostat, 2025[2]), largely reflecting continued reliance on fossil fuels in energy supply (Figure 2.1, Panel C). At the same time, decarbonisation could test the Dutch economy’s trade-driven prosperity, as it challenges international cost competitiveness in the agricultural and industrial sectors (Chapter 4). Further pressures arise from excessive nitrogen depositions due to intensive livestock farming, which also constitute a significant obstacle to expanding infrastructure and the housing stock due to additional nitrogen emissions from the construction process (Chapter 3). Finally, with about a fifth of the population and a quarter of land area below sea level, the hazard from rising water and increasingly frequent extreme weather events, such as river flooding, is high.
Current policies appear insufficient to reach climate and energy goals, and ultimately achieve the green transition. The latest independent assessment by the government’s environmental agency warns that most 2030 emission reduction targets are out of reach under current policy settings (PBL, 2024[3]), in a stark setback from previous judgements (PBL, 2023[4]; 2022[5]). A shortfall in emission reductions is expected in most sectors, due to implementation delays and the scraping of policy measures previously on the agenda, while nitrogen remains an issue (Chapter 1). Moreover, electrification lags across sectors (Figure 2.1, Panel D), chiefly due to growing congestion in the electricity grid, straining energy security (TenneT, 2024[6]). In addition, uncertainty remains as the impact of recent developments, including changes to the climate policy agenda under the coalition agreement (Chapter 1) and measures from the April 2025 climate package for green growth (Government of the Netherlands, 2025[7]), is unlikely to be confirmed until the next independent assessment due in September.
To meet its climate goals, the Netherlands must continue building on past progress and existing policy tools to accelerate the green transition. This chapter highlights key requirements, including aligning carbon pricing across sectors, accelerating the electrification of transport and heat generation, enhancing the electricity grid, providing a consistent and predictable policy environment, broadening adaptation measures, and clarifying the repartition of climate risks. At the same time, the country needs to manage trade-offs between international competitiveness and environmental sustainability (Chapter 4). In addition, maintaining favourable framework conditions and continuing to balance the use of price instruments, innovation subsidies, and regulatory standards is essential to facilitate the reallocation of capital and labour towards low-carbon activities, as recommended in previous Economic Surveys of the Netherlands (OECD, 2023[8]; 2021[9]) (Table 2.1). Moreover, offsetting undesirable distributional effects for households is necessary to ensure the political and social acceptability of climate policies (OECD, 2023[8]).
Note: Panel A: figures refer to total GHG emissions excluding LULUCF; OECD refers to a weighted average. Panel B: figures refer to total GHG emissions including LULUCF; OECD refers to a weighted average. Panel C: figures refer to the share of total energy supply. Panel D: figures refer to the share of total final energy consumption; “Industry” includes non-energy use; “Heat” is produced from the combustion of fuels and from electrically powered heat pumps and boilers.
Source: OECD Environmental Statistics (database); and IEA World Energy Balances (database).
The Netherlands is unlikely to meet its nationally-legislated 55% GHG emission reduction by 2030 under current policies. Only electricity generation is on track to meet the target, while all other sectors lag (Figure 2.2). While the country is set to achieve its EU emission target under the Effort Sharing Regulation, in part due to the pandemic-induced slowdown and to the surge in energy prices, the projected emission path remains above the one set out in the directive (Table 2.2). Reaching European targets for renewable energy share and energy savings will also be challenging, after they were tightened sharply in 2023.
Both implementation delays and policy changes are weighing on decarbonisation progress. Setbacks include slower-than-projected rollout of offshore windfarms, the stagnation of green hydrogen production, and delays in tailor-made emission reduction agreements with large emitters in industry, and the scraping of the planned replacement of the motor vehicle tax by a pay-as-you-go charge (PBL, 2024[3]). Moreover, some of the most effective mitigation options for disproportionately high-emission sectors have become politically challenging, including reducing peak-hour motorway speed and buying out the most nitrogen-intensive livestock farms for closure.
Additional and effective mitigation efforts are needed immediately if the country is to meet its 2030 targets. To achieve the required mitigation efforts within political constraints, and given long lead times for new policies, tightening existing policy measures is key, mainly by strengthening both carbon pricing and support for electrification of household heat and transport.
GHG emissions, by sector (MtCO2e)
Note: “2030 target” refers to sectoral allocations under the 2021-30 Climate Plan; see Government of the Netherlands (2020[10]) for details.
Source: Netherlands Environmental Assessment Agency (PBL).
Source: European Commission; and Government of the Netherlands.
2.2.1. Phasing out implicit fossil fuel support
The Netherlands has strong carbon taxation in international comparison, with over 80% of GHG emissions and 90% of CO2 emissions from energy use subject to some form of pricing and a high net effective carbon rate (OECD, 2024[11]). However, large disparities in the price of carbon emissions across Dutch sectors and users hinder decarbonisation, a long-standing issue discussed in previous Economic Surveys (OECD, 2023[8]; 2021[9]). While households face high carbon taxation in buildings and road transport, carbon pricing in agriculture, industry, and electricity generation remains lower (Figure 2.3). These disparities reflect substantial fossil fuel support, which results from reduced rates and tax exemptions on the use of energy for industrial firms and electricity producers, including for the energy tax (energiebelasting) and the coal tax (kolenbelasting). The fiscal cost of support measures for fossil fuels is estimated to about 3.6% of GDP in 2023 based on the OECD inventory approach (OECD, 2024[12]), with such a large figure partly reflecting the specific tax benchmark used to define tax expenditures in the Netherlands. This implicit support is meant to address the country’s concerns regarding carbon leakage and international cost competitiveness in emission-intensive trade-exposed sectors. However, fossil fuel support measures distort price signals, keep fossil fuel consumption high as users do not bear the full environmental cost, and raise the overall cost of mitigation. Moreover, agriculture is largely exempt from direct carbon pricing, even though livestock farming is a major source of methane emissions, and does not pay any tax on nitrogen deposition, despite strong environmental damage.
The country starts from a strong position to further align carbon taxation across sectors and users, thanks to a robust carbon pricing framework, as discussed in previous Economic Surveys (OECD, 2023[8]; 2021[9]). Carbon pricing is supported by the EU Emission Trading Scheme (ETS), which covers electricity generation and large manufacturing establishments, and by the national CO2 levy (CO2-heffing), which places a floor on the trajectory of carbon prices until 2030 and extends coverage to waste incineration and large nitrous oxide emitters. Complementary policies support the shift of production processes away from fossil fuel, particularly the SDE++ scheme, which subsidises the deployment of low-carbon technologies, such as carbon capture and storage, green hydrogen production, and wind power (OECD, 2021[13]). Emissions are also taxed through fuel excise, mostly in road transport, buildings, and small industrial firms, and will be subject to emission trading under the new EU ETS2 starting in 2027. Finally, the ongoing phasing in of the EU Carbon Border Adjustment Mechanism (CBAM), to apply in its definitive regime from 2026, will partly attenuate international competitiveness concerns vis-à-vis non-EU countries.
Carbon pricing and emissions, by sector (bubble size represents sectoral share of country CO2 emissions), 2023
Note: Reading: in the Netherlands in 2023, CO2 emissions from energy use in industry account most of country emissions (about twice as much as the electricity sector), with about 70% of priced at more than 60 EUR/tCO2 (the midpoint estimate of 2020 carbon price levels consistent with reaching net zero by 2050), and an average net effective carbon rate of 72 EUR/tCO2.
Source: OECD Effective Carbon Rates (database); and OECD Share of Emissions Priced (database).
The Dutch authorities should take advantage of the opportunity presented by the EU-wide phasing in of CBAM and ETS2 to phase out fossil fuels support, while maintaining a level playing field with other member countries. To identify implicit subsidies that hinder the green transition, the government can leverage the Ministry of Finance’s inventory of foregone tax revenue from measures that potentially support the use of fossil fuels (Ministry of Finance, 2024[14]). The Ministry could also use an external cost approach based on so-called “carbon price deficits” to identify implicit support. This approach, which identifies instances where emitters do not internalise the climate damage from their emissions, would be better suited for the Netherlands (Brink et al., 2024[15]). For example, lower energy tax rates for large electricity consumers are considered fossil fuel support under the inventory approach, but not necessarily under the external approach, as scrapping reduced rates would raise electricity prices, thereby slowing electrification. The current preparation of the Climate Plan for 2026-35 is an opportunity to include a phased removal of fossil fuels support.
To further incentivise reductions in nitrogen emissions and depositions in the agriculture sector, responsible for about two thirds of non-GHG emissions, the government could consider setting either clear and binding emissions and deposition limits at farm level, or a pricing system. Pricing could build on a feebate, that is, a combination of fees and rebates based on performance vis-a-vis an agreed benchmark. Specifically, farmers would be charged in case their depositions per hectare or unit of output are higher than the industry average, and rewarded in case they are lower. If designed to be revenue-neutral, a feebate could be more politically feasible than introducing an environmental tax for methane emissions and nitrogen deposition in the agricultural sector, while providing the same emission abatement incentives. However, challenges exist regarding practical implementation, including setting the appropriate benchmark and measurement, reporting and verification (MRV). In a first step, and until scientific uncertainty and legal issues regarding the current MRV system are resolved, the government could consider a pilot project with volunteer participants or focus on peak loaders. To improve political acceptability, such a reform could be negotiated as part of a comprehensive and transparent package of measures that provides long-term clarity for the farming sector, and supported by a broad coalition of farmer groups, environmental associations, and local governments.
Addressing the regressive effects of higher carbon taxation is essential to ensure the social and political acceptability of climate policies. Stronger carbon taxation will likely push up prices for some necessary items, such as energy, food, and transport, disproportionally impacting low-income households, as they tend to spend proportionally more on necessary consumption. Yet, Dutch energy and climate policies have focused on delivering fast results, without properly addressing distributional effects (IEA, 2025[16]). The Dutch authorities started embedding a stronger and more consistent emphasis on distributional considerations for policy design, implementation, and evaluation in the updated national Climate Plan for 2026-35, which is welcome. Partial, targeted, and well-designed fiscal support for low-income groups facing financial strain is necessary to avoid undermining public support for decarbonisation efforts while preserving energy saving incentives, as recommended in the previous Economic Survey (OECD, 2023[8]). However, compensating for regressive environmental policies is challenging in practice, as the variation in consumption patterns is generally larger within income groups than between income groups (Swierstra, Verbek and Vlekke, 2024[17]).
2.2.2. Accelerating the adoption of heat pumps and electric vehicles
The electrification of heat generation and road transport, a crucial requirement to achieve cost-effective decarbonisation, is not as fast as in top performing countries. Only 6% of households use heat pumps, below the adoption rate needed to meet sectoral targets (Figure 2.4, Panel A). At current penetration rates, assuming a 15-year lifespan for boilers and even if the 2026 ban were re-instated, only about a third of households will be equipped with a heat pump by 2030, and full electrification of household heat generation would only be achieved in 2040. While households’ adoption of battery electric vehicles (EV) is relatively high (Figure 2.4, Panel B), achieving electrification as set in the national Climate Plan remains challenging. Without stronger incentives and given the relatively slow turnover of passenger car fleet, with average vehicle lifespan of 12 years, EVs would only account for about a third of the passenger car stock by 2030. Moreover, the electrification of commercial vehicles lags, with only 1.3% of the van fleet and 0.2% of the truck fleet electrified in 2022 (RVO, 2023), By contrast, the electrification of buses is well advanced, reaching 16% of buses and 25% of public buses.
Source: European Heat Pump Association; and IEA Global EV Outlook (database).
Current policies to help households’ adoption of electric technologies provide an excellent base to strengthen support, leveraging the large existing residential solar photovoltaic (PV) capacity. Measures for heat pump installation have largely removed upfront cost and financing barriers. The investment subsidy for sustainable energy (investeringssubsidie duurzame energie, ISDE) covers about 30% of the cost of small-scale investments in energy efficiency, including heat pumps, with a budget of EUR 600 million in 2024, while the National Heat Fund provides interest-free loans for household with gross income below EUR 60 000. Regrettably, the ban on new gas boilers, initially set to take effect in 2026 and providing a strong anchor for adoption incentives, was withdrawn, a setback that should be reconsidered. Measures for EV adoption included a EUR 3000 purchase subsidy (subsidieregeling elektrische personenauto's particulieren, SEPP) per new vehicle in 2024, with a budget of EUR 58 million, and the partial exemption from road tax until 2024. Moreover, charging infrastructure is well developed, with one charging point per every four EVs, among the highest density in the European Union (European Commission, 2024[18]). The end of the SEPP purchase subsidy and the introduction of subsidies for firms to install EV charging points (SPRILA for cars and SPULA for trucks) were announced at the 2024 budget. Finally, the BAZEB (bestuursakkoord zero emissie busvervoer) agreement that all new buses must use 100% renewable energy or fuel from 2025 onwards boosted the electrification of public transport.
The Dutch authorities should strengthen incentives for the adoption of heat pumps and electric vehicles. Current fiscal support is generally appropriate, especially subsidies for heat pumps, which can be both effective and equitable, as studies for the United States suggest that adoption is not income-correlated (Davis, 2024[19]). The government could reform the taxation of motor vehicles (motorrijtuigenbelasting) to preserve incentives for the adoption of electric vehicles (EVs). The current weight-based progressive tax structure penalises EVs, as batteries are generally heavier than internal combustion engines. Introducing a feebate system, whereby higher taxes on polluting vehicles fund lower taxes on EVs, would further support cleaner vehicle adoption without increasing the overall tax burden on vehicle owners or subsidising mature technologies. Moreover, continuing to invest in charging infrastructure would support broader uptake, especially in less-deserved areas. Beyond fiscal support, providing long-term certainty regarding the timeline of the ban on the sale of new gas boilers and internal combustion engines is crucial to boost adoption, by ensuring consistent and predictable returns for households’ investments in heat pumps and EVs.
To further encourage adoption, the authorities could launch national public awareness campaigns on the energy efficiency and environmental benefits of heat pumps and EVs. Communicating clear information about both long-term savings and available public support for reducing upfront cost, as done in the United Kingdom for the Boiler Upgrade Scheme (OECD, 2024[20]), can attenuate consumer hesitancy. The government could build on the existing “Flip the switch” campaign ("Zet ook de knop om"), currently focused on changing energy consumption behaviours, to provide relevant cost and savings information about the adoption of heat pumps and EVs.
When promoting the electrification of heating and road transport, the authorities should carefully assess the interaction between individual adoption incentives and broader policy objectives. For example, the widespread adoption of individual heat pumps can weaken the business case for district heating. Therefore, subsidies for heat pumps would be best avoided in neighbourhoods where district heating is planned or in operation. Moreover, both heat pumps and EVs can increase peak electricity demand, adding stress to the grid, as highlighted in the recent Interdepartmental Policy Research (IBO) report on financing the electricity infrastructure (below).
Faster electrification, coupled with the ongoing decarbonisation of electricity generation, is both necessary to achieve net zero and a key step towards energy security, as it reduces reliance on fossil fuels and supports renewable energy integration, particularly in heating, transport, and industry. However, the scale and lead times of required electrification investments, as well as the country’s industrial specialisation in carbon-intensive activities, present significant barriers, worsened by congestion on the electricity grid.
Capacity constraints on the Dutch grid constitute a major challenge to electrification, reflecting both recent developments and historic legacy. The transmission system operator estimates that grid capacity needs to nearly triple by 2050 to meet demand (TenneT, 2023[21]), but permitting delays, labour shortages, and the nitrogen issue slow grid expansion projects (Chapter 1). The required increase in grid capacity is particularly large, given prior reliance on domestically natural gas for residential heating and manufacturing processes. Another challenge is policy uncertainty, against the backdrop of recent climate policy shifts.
An enhanced electricity grid, with higher capacity and flexibility, is needed to accommodate growing volumes of electricity transmission and the rise in variable renewable energy generation. Moreover, a clear and predictable policy framework is necessary to encourage long-term investments in the green transition.
2.3.1. Increasing grid capacity and flexibility
Rapidly rising electricity demand and generation have outpaced grid capacity in the Netherlands, creating a major bottleneck for both electrification and economic activity. Capacity constraints and connection delays are slowing the rollout of both large-scale and household renewable energy installations, limiting the expansion of firms, and impeding new housing developments, including in the dense and urban Randstad. Most parts of the Dutch grid are considered congested, and waiting lists for new or increased connection include about 17 500 large users and generators (IEA, 2025[16]). Congestion pushes up end-user electricity prices, as system operators pass through the rising cost of technical and market-based interventions to manage imbalances on the grid (Figure 2.5, Panel A). Grid congestion partly reflects government support for electrification, including variable renewable energy generation through offshore wind and distributed solar PV, both large-scale and residential (Figure 2.5, Panel B).
Note: Panel B refers to electricity generation from solar PV, solar thermal, offshore wind, and onshore wind.
Source: IEA (2025) Energy Policy Review: The Netherlands 2024; TenneT Financial Reports; and International Renewable Energy Agency.
Increasing grid capacity is key to accommodating the growth in electricity transmission volumes and enable electrification of the Dutch economy. The authorities have long recognised the challenge and taken measures to accelerate grid expansion, optimise the use of the existing grid, and improve data collection. The national action plan for grid congestion (Landelijk Actieprogramma Netcongestie, LAN), set in 2022, brings together public and private stakeholders, including relevant administrations in both national and provincial governments, the regulator, grid operators, and industry clusters and organisations, to develop solutions for grid congestion and make relevant information publicly available, including congestion maps. Planned investments in grid infrastructure were revised upwards significantly in 2024 (TenneT, 2024[22]), and the first connection of a large capacity battery project to the grid was recently announced for October 2025 (TenneT, 2024[23]). Moreover, the system operator is implementing various technical enhancement and smart grid measures to increase the capacity of the current infrastructure, such as reconductoring, voltage uprating, and dynamic line rating (IEA, 2025[16]). However, faster delivery is necessary to ensure energy security and deliver a net zero economy.
The Dutch authorities should continue expediating procedures and regulations for grid expansion and connection. Ensuring that all permitting processes are performed at the regional level and standardising application requirements and assessments across regions would facilitate coordination between the governments, system operators, and end users. Better coordination would allow for the introduction of parallel workflows, rather than sequential processes, help to allocate scarce technical staff across construction sites, and contribute to faster project delivery. Ongoing governance reforms that support the coordination of all stakeholders at the regional level go in the right direction, especially the creation of regional energy boards for the management of energy infrastructure, following the successful model of water boards (waterschap) for the management of water resilience.
The authorities also need to expand training programs for workers in electricity- and energy-related fields to deliver on the expansion of grid infrastructure given severe labour shortages, especially for technical skills. Estimates suggest that realising the necessary investments to achieve 2030 targets requires about 28 000 technical jobs to be created and filled, above the 26 000 full-time equivalents currently employed in the Dutch energy sector, including network operators (Ecorys, 2021[24]). Shifting the composition of active labour market policies towards training, especially for technical skills related to the net zero transition, and providing stronger incentives for co-financing by employers would help, as discussed in depth in the previous Economic Survey (OECD, 2023[8]).
Enhancing grid flexibility based on smart grid solutions is the other key solution to address congestion. The system operator started implementing demand-side grid flexibility measures to help align electricity consumption with supply availability and grid capacity, which is welcome. After stakeholder consultations, the regulator recently broadened system operators’ mandate and responsibility to implement flexibility measures (ACM, 2024[25]). Since January 2025, all large end-users are on a time-of-use contract and charged a higher price if they use full capacity during peak hours. System operators can also offer faster grid connection to new users who agree to so-called non-firm contracts, whereby users anticipatively agree to not always have access to full capacity in exchange for lower grid tariffs. Moreover, the regulator has approved a new framework in October 2024, whereby the “first-come-first-served” principle is replaced by a “priority lane”, so that system operators can prioritise connections for projects that solve or limit grid congestion, such as battery systems. By contrast, supply side grid flexibility measures, which help match electricity generation and distribution with fluctuations in demand and accommodate intermittent renewable energy sources, are lagging, despite strong private sector interest for large battery parks (IEA, 2025[16]).
The Dutch authorities should promote the swift implementation of existing demand-side flexibility solutions based on smart grid and address supply side bottlenecks. The rapid integration of large-scale battery storage solutions into the grid should be a priority. To ensure that batteries enhance flexibility rather than exacerbate local grid congestions, pricing mechanisms and contracts for battery operators should reflect both local and national grid conditions, as recommended in the recent Energy Policy Review of the Netherlands (IEA, 2025[16]). For households, the net metering scheme for residential solar PV should be phased out in a way that addresses the regulator’s concerns (ACM, 2024[26]), as it is no longer needed for profitability and adds stress to the grid. Ending net metering would also create stronger incentives for homeowners to invest in small-scale battery systems. Additional demand flexibility measures, such as time-of-use pricing, could be considered, as they have proven effective in shifting electricity demand to off-peak periods when the grid is under less strain (Bernard et al., 2024[27]).
2.3.2. Providing a consistent policy path beyond 2030
Recent shifts in Dutch climate policy create uncertainty and jeopardise the green transition, especially the long-term goal of net zero by 2050. Policy changes, such as the removal of the 35% production cap on coal-fired plants, the withdrawal of the ban on new gas boilers, or the phasing out of the National Growth Fund, undermine investors’ confidence and the risk-return profile of long-term investments in low-carbon technologies. Uncertainty can lead to delays not only in the deployment of large-scale electrification technologies, but also in smaller-scale investments by SMEs, such as energy efficiency improvements, despite significant support by the Netherlands Enterprise Agency (RVO). This creates mixed signals for long-term decarbonisation efforts, undermining energy security (van der Weyde, Verstraten and Hers, 2024[28]) and weighing on energy-related investment and on productivity (Chapter 1).
Providing a consistent and predictable policy environment is key to ensuring stakeholder confidence and unlock necessary deep decarbonisation investments. Legally binding climate targets under the Dutch Climate Act constitute a strong domestic framework for the green transition, on top of the EU Green Deal. Robust governance mechanisms ensure transparency and accountability, including annual GHG emissions forecast by the independent Netherlands environmental assessment agency, annual briefing to parliament, quinquennial Climate Plans, and mandatory advice by the Council of State and the Scientific Climate Council. Substantial policy impulse through subsidies and price signals supports the deployment of both industrial-scale and household-level low-carbon technologies to achieve 2030 sectoral emission reduction targets. However, the framework lacks a clear path to net zero by 2050.
The Dutch authorities should swiftly expand the climate and energy strategy beyond 2030, based on broad multi-party agreement, with priorities, policies and timeline ensuring alignment with the Climate Act and EU impulse. The outcome of the ongoing update of the national Climate Plan will help to provide the necessary long-term predictability. The indicative sectoral targets embedded in the draft plan for 2026-35 released in March 2025 constitute a major step in that direction (KGG, 2025[29]). Clarity is also needed regarding sector-specific priorities, especially to increase demand certainty for emerging technologies such as carbon capture and storage (CCS) and green hydrogen (Chapter 4). Introducing obligations for renewable hydrogen in industrial sectors to increase demand certainty, as recommended in the recent Energy Policy Review of the Netherlands (IEA, 2025[16]), would help to unlock necessary investments in electrolysers and could create new export opportunities (Chapter 4). Finally, maintaining consistent policy direction regarding the electrification of transport and heating is key to supporting households’ decarbonisation efforts.
The government’s coalition agreement features an ambitious nuclear energy agenda. Plans consist of extending the operating lifetime for the existing reactor and building two new large conventional reactors, as well as two more reactors, possibly small modular reactors (SMR). Funding was reallocated within the Climate Fund to support nuclear investments. Nuclear power can contribute to improving energy security, and nuclear electricity production is more stable over time compared to intermittent renewables while also being low-carbon, but concerns include waste storage and high-impact negative risks in case of severe nuclear accidents. It is important for nuclear projects, as well as any other energy project, to be underpinned by transparent and comprehensive life-cycle cost-benefit analyses that inter alia account for the cost of constructing power plants, storing nuclear waste and decommissioning disused power plants. Such analysis must also consider the (direct and indirect) subsidies granted through the entire production cycle.
The Netherlands excels in water resilience, but broader adaptation measures are needed to address non-water climate risks, such as storms, heat stress, and drought. Moreover, built environment vulnerabilities, including changes in ground water levels, threatens building foundations and incur high repair costs.
Increasingly frequent extreme weather events bring significant costs and knock-on effects on the economy, as seen in July 2021 when two days of heavy rainfall flooded parts of the province of Limburg, threatening dam and dike infrastructure, and inflicting an estimated EUR 400-450 million in damage to about 600 firms and 2 500 households (Kok, Slager and Hans, 2023[30]). In the long run, macroeconomic costs of climate change to Dutch households, firms, and the government under current settings are estimated at EUR 8.1-9.6 billion per year by 2100 (CPB, 2023[31]). Adaptations measures for waterlogging, heat, drought, flood protection, and freshwater supply are estimated to have the potential to reduce climate damage to EUR 1.1-1.9 billion per year by 2100 at an annual cost of about EUR 2.7 billion (CPB, 2023[31]).
2.4.1. Broadening the national adaptation strategy
The Netherlands is in an excellent position to continue developing and implementing climate adaptation measures, given strong public finances and a storied experience in adapting to its environment. Strong areas of current adaptation efforts include a comprehensive water governance program that ensures strong flood resilience, including the Delta Plans and Delta Fund, which are endowed with over EUR 25 billion. Flood risk governance is strongly institutionalised, with water safety requirements legislated in the Water Law. Innovative spatial planning initiatives integrate climate adaptation into urban development, including as part of the infrastructure and master landscaping project Room For The River. The Environmental Planning Act (omgevingsloket), in force since 2024, streamlines regulations for spatial planning, environmental management, and permitting. The act is the outcome of in-depth preparation since 2015.
Dutch adaptation strategies for water resilience are unrivalled, but there is a limited focus on adapting to non-water climate risks, such as heatwaves, droughts and air pollution. Moreover, the national strategy overlooks differences in risk and adaptive capacity across people and areas, leading to disparities in how adaptation benefits are realised across regions and communities (OECD, forthcoming[32]; PBL, 2024[1]). Finally, there is insufficient integration of adaptation priorities with other policy objectives, such as addressing housing shortages (Chapter 3).
The Dutch authorities are doing well to adopt a more holistic approach for the new National Climate Strategy under preparation, expanding the focus beyond water resilience to include hazards such as heat stress, drought, and ecosystem degradation. The updated strategy due in 2026 could include in-depth analysis, clear objectives, and progress monitoring, as is the case now for water risks. The strategy could embed distributional considerations into adaptation planning to ensure equitable outcomes across regions and income groups.
2.4.2. Clarifying the repartition of climate risks
Insurance coverage against climate risk is relatively high in the Netherlands, with about two thirds of all economic losses from natural hazards since 2010 insured (Figure 2.6). Property catastrophe insurance is largely non-compulsory in the Netherlands, including against flooding, but often part of standard cover, with high market penetration (Europe Insurance, 2024). Free-riding, whereby agents underinsure because they expect post-disaster compensation by the state to cover losses, is limited thanks to a national framework for damage compensation differentiating floods from different water systems. Physical damage from uninsurable and unavoidable risk (i.e., against the sea, the rivers Meuse, Scheldt and Rhine, and large lakes), and which cannot be recovered elsewhere, are compensated by the state under the Calamities Compensation Act (Wet tegemoetkoming schade bij rampen, WTS). Losses from other water-related catastrophes, such as non-primary river flooding or torrential rains, are insurable on the private market and not covered by the state.
Insured losses from natural hazards (% of total economic losses, 2010-2023)
Note: Figures refer to the share of the sum of damages and losses.
Source: Swiss Re, sigma (database), all rights reserved.
The two-tiered Dutch flood insurance system allocates risk efficiently in principle, but in practice some policyholders struggle to figure out their effective insurance level, due to lack of information regarding policy coverage, and the complexity of climate risks. The 2021 floods in the province of Limburg, when heavy rains swelled rivers, provide a striking example of how information gaps undermine incentives within the system. On one hand, households and firms were unsure about whether they were insured against non-primary river flooding, torrential rains, or both. On the other hand, insurers considered the event a riverine flood, so that even households and firms insured against pluvial flooding did not receive payouts, and the government ultimately stepped in to compensate the underinsured.
The Dutch authorities should clarify the repartition of climate-related risk between the state and the private sector, especially flood risk, and require insurers to provide policyholders with transparent information regarding coverage. Promoting insurance uptake and reducing insurance policy cost would contribute to better risk allocation, as behavioural changes driven by correct insurance policy pricing matter in a context of relatively high flood risk. Moreover, quick post-flooding insurance payouts have been shown to reduce business interruption duration and revenue losses (Endendijk et al., 2024[33]). Private flood insurance mandates can reduce premia but imply cross-subsidisation of the most exposed policyholders by the less exposed, requiring the enforcement of minimum adaptation measures at the policyholder level to reduce moral hazard. Other arrangements can increase insurability, including based on voluntary participation and risk-adjusted premia, but require clear definitions of required adaptation measures and a delimitation of uninsurable areas.
Tackling the growing threat to building foundations due to changing groundwater levels also requires increased coordination between the private sector and the state. An estimated 425 000 Dutch buildings, about 6% of the stock, face significant stability issues, as the wooden piles supporting old constructions and large sections of infrastructure, designed to overcome soil subsidence, are rotting due to the increased alternance of heavy rains and prolonged periods of drought, coupled with the necessary management of groundwater levels to keep both built areas and croplands dry (RLI, 2024[34]; TNO, 2021[35]). Structures built on cheaper, shallow foundations up to the 1970s are also sensitive to changing groundwater levels. Typical per-house costs of necessary repair and reinforcement are large, ranging between EUR 30 000 and EUR 120 000 (6-25% of average purchase price), but largely unknown to homeowners, due to the absence of transparent, publicly available building-level information on foundations. As such, foundations quality is not correctly priced into housing transactions, so that little incentive exists for repair work.
The Dutch authorities should require that information about the quality of building foundations be made available in the land register upon housing transactions, based on audits and technical assessments by accredited firms. Subsidies could offset most of the audit and assessment cost to homeowners. The existing Sustainable Foundations Restoration Fund, which was set to finance loans to households who cannot access the regular mortgage market, should be scaled up to accommodate the likely increase in loan demand. Close monitoring of the impact on the housing market by supervisory authorities will be required, as the realisation of latent repair costs could significantly reduce net housing equity for leveraged homeowners (Chapter 1). As mandatory assessments of foundations quality will increase labour demand in the already tight construction sector (Chapter 3), complementary labour market policies are needed, as discussed in the previous Economic Survey (OECD, 2023[8]).
References
[26] ACM (2024), Advies afschaffen salderingsregeling [Advice on ending the netting scheme], Autoriteit Consument & Markt, The Hague, https://www.acm.nl/nl/publicaties/acm-adviseert-wetsvoorstel-afschaffen-salderingsregeling-te-verduidelijken (accessed on 7 November 2024).
[25] ACM (2024), Pakket aan maatregelen tegen netcongestie [Package of measures against grid congestion], Autoriteit Consument & Markt, The Hague, https://www.acm.nl/nl/publicaties/acm-presenteert-pakket-aan-maatregelen-tegen-netcongestie (accessed on 7 November 2024).
[27] Bernard, L. et al. (2024), Decarbonizing heat: The impact of heat pumps and a time-of-use heat pump tariff on energy demand, National Bureau of Economic Research, Cambridge, MA, https://doi.org/10.3386/w33036.
[15] Brink, C. et al. (2024), “Abolishing fossil fuel subsidies”, PBL Report, No. 5388, Netherlands Environmental Assessment Agency, The Hague, https://www.pbl.nl/en/publications/abolishing-fossil-fuel-subsidies-a-brain-teaser-rather-than-a-no-brainer (accessed on 4 November 2024).
[31] CPB (2023), Climate climate change and intergenerational distribution of financial burdens, Netherlands Bureau for Economic Policy Analysis, The Hague, https://www.cpb.nl/sites/default/files/omnidownload/CPB-Publication-Climate-change-and-intergenerational-distribution-of-financial-burdens.pdf (accessed on 31 October 2024).
[19] Davis, L. (2024), “The economic determinants of heat pump adoption”, Environmental and Energy Policy and the Economy, Vol. 5, pp. 162-99, https://doi.org/10.1086/727881.
[24] Ecorys (2021), Klimaatbeleid en de arbeidsmarkt: Een verkennende studie naar de werkgelegenheidseffecten van CO2-reductiemaatregelen [Climate policy and the labour market: An exploratory study on the employment effects of CO2 reduction measures], Dutch Sustainable Energy Association, Utrecht, https://www.nvde.nl/wp-content/uploads/2021/02/Klimaatbeleid-en-de-arbeidsmarkt-Ecorys-rapport-26-februari-2021.pdf.
[33] Endendijk, T. et al. (2024), “Enhancing resilience: Understanding the impact of flood hazard and vulnerability on business interruption and losses”, Water Resources and Economics, Vol. 46, p. 100244, https://doi.org/10.1016/j.wre.2024.100244.
[18] European Commission (2024), EU transport in figures – Statistical pocketbook 2024, Publications Office of the European Union, Brussels, https://data.europa.eu/doi/10.2832/16593.
[2] Eurostat (2025), EU GHG emissions from the production and consumption (footprint) perspectives, https://doi.org/10.2908/CLI_GGE_FOOT.
[7] Government of the Netherlands (2025), Pakket voor Groene Groei: voor een weerbaar energiesysteem en een toekomstbestendige industrie [Green Growth Package: Towards a resilient energy system and future-proof industry], https://www.tweedekamer.nl/kamerstukken/brieven_regering/detail?id=2025Z08486&did=2025D19366.
[10] Government of the Netherlands (2020), Klimaatplan 2021-2030 [Climate Plan 2021-30], Rijksoverheid, https://www.rijksoverheid.nl/onderwerpen/klimaatverandering/documenten/beleidsnotas/2020/04/24/klimaatplan-2021-2030 (accessed on 7 November 2024).
[16] IEA (2025), Energy Policy Review: The Netherlands 2024, International Energy Agency, Paris, https://www.iea.org/reports/the-netherlands-2024.
[29] KGG (2025), Klimaatplan 2025-25 [Climate Plan 2025-35], Ministry of Climate and Green Growth, https://www.tweedekamer.nl/kamerstukken/brieven_regering/detail?id=2025Z04814&did=2025D11140.
[30] Kok, M., K. Slager and Hans (2023), “Rapid damage assessment caused by the flooding event 2021 in Limburg, Netherlands”, Journal of Coastal and Riverine Flood Risk, Vol. 2, https://doi.org/10.59490/jcrfr.2023.0010.
[14] Ministry of Finance (2024), Ambtelijk rapport Aanpak Fiscale Regelinen [Official report on the evaluation of tax expenditures], https://www.rijksoverheid.nl/documenten/rapporten/2023/06/30/ambtelijk-rapport-aanpak-fiscale-regelingen.
[20] OECD (2024), OECD Economic Surveys: United Kingdom 2024, OECD Publishing, Paris, https://doi.org/10.1787/709e70b8-en.
[12] OECD (2024), OECD Inventory of Support Measures for Fossil Fuels 2024: Policy Trends up to 2023, OECD Publishing, Paris, https://doi.org/10.1787/a2f063fe-en.
[11] OECD (2024), Pricing Greenhouse Gas Emissions 2024: Gearing Up to Bring Emissions Down, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris, https://doi.org/10.1787/b44c74e6-en.
[8] OECD (2023), OECD Economic Surveys: Netherlands 2023, OECD Publishing, Paris, https://doi.org/10.1787/dbda2baf-en.
[9] OECD (2021), OECD Economic Surveys: Netherlands 2021, OECD Publishing, Paris, https://doi.org/10.1787/dd476bd3-en.
[13] OECD (2021), Policies for a Carbon-Neutral Industry in the Netherlands, OECD Publishing, Paris, https://doi.org/10.1787/6813bf38-en.
[32] OECD (forthcoming), “Accelerating climate adaptation: Towards a framework for assessing and addressing adaptation needs and priorities”.
[3] PBL (2024), Klimaat- en energie verkenning 2024 [Climate and energy outlook 2024], Netherlands Environmental Assessment Agency, The Hague, https://www.pbl.nl/publicaties/klimaat-en-energieverkenning-2024 (accessed on 25 October 2024).
[1] PBL (2024), Klimaatrisico’ in Nederland [Climate risks in the Netherlands], Netherlands Environmental Assessment Agency, The Hague, https://www.pbl.nl/publicaties/klimaatrisicos-in-nederland (accessed on 31 October 2024).
[4] PBL (2023), Klimaat- en energy verkenning 2023 [Climate and energy outlook 2023], Netherlands Environmental Assessment Agency, The Hague, https://www.pbl.nl/publicaties/klimaat-en-energieverkenning-2023 (accessed on 25 October 2024).
[5] PBL (2022), Klimaat- en energie verkenning 2022 [Climate and energy outlook 2022], Netherlands Environmental Assessment Agency, The Hague, https://www.pbl.nl/publicaties/klimaat-en-energieverkenning-2022 (accessed on 25 October 2024).
[34] RLI (2024), Goed gefundeerd: Advies nationale aanpak funderingsproblematiek [Well founded: Advice national approach to the foundations issue], Council for the Environment and Infrastructure, The Hague, https://www.rli.nl/publicaties/2024/advies/goed-gefundeerd (accessed on 31 October 2024).
[17] Swierstra, R., M. Verbek and M. Vlekke (2024), Prijsontwikkeling van consumptie: Verschillen tussen huishoudens [Price development of consumption: differences between households], https://www.cpb.nl/prijsontwikkeling-van-consumptie-verschillen-tussen-huishoudens.
[23] TenneT (2024), Batterijgigant GIGA Storage en TenneT sluiten eerste tijdsduurgebonden contract [Battery giant GIGA Storage and TenneT conclude first time-based contract], TenneT Holding B.V., Arnhem, https://www.tennet.eu/nl/nieuws/batterijgigant-giga-storage-en-tennet-sluiten-eerste-tijdsduurgebonden-contract (accessed on 7 November 2024).
[22] TenneT (2024), Groen licht voor investeringsplannen netbeheerders [Green light for grid operator’s invetement plan], TenneT Holding B.V., Arnhem, https://www.tennet.eu/nl/nieuws/groen-licht-voor-investeringsplannen-netbeheerders (accessed on 7 November 2024).
[6] TenneT (2024), Monitor Leveringszekerheid 2024 [Supply Security Monitor 2024], TenneT Holding B.V., Arnhem, https://www.tennet.eu/nl/over-tennet/publicaties/rapport-monitoring-leveringszekerheid (accessed on 7 November 2024).
[21] TenneT (2023), Target grid: Het elektriciteitsnet van de duurzame toekomst begint vandaag [Target grid: The electricity grid for a sustainable future starts today], TenneT Holding B.V., Arnhem, https://www.tennet.eu/target-grid (accessed on 7 November 2024).
[35] TNO (2021), Naar een kennisagenda funderingsproblematiek [Towards a knowledge agenda for the foundations issue], Netherlands Institute for Applied Scientific Research, The Hague, https://publications.deltares.nl/11206466_002.pdf (accessed on 31 October 2024).
[28] van der Weyde, H., P. Verstraten and S. Hers (2024), “Energieleveringszekerheid vraagt om urgente actie en niewe afwegingen [Energy security calls for urgent action and new considerations]”, TNO Paper, No. 996117, Netherlands Organisation for Applied Scientific Research, The Hague, https://resolver.tno.nl/uuid:ed2b3132-0ff2-4d34-95fa-2a1904b6bf25 (accessed on 7 November 2024).