Playing field test provides insight into the effect of climate policy

Comparable climate policy abroad

Gulbahar Tezel and Niels Muller, both partners at PwC, have previously conducted similar studies on behalf of the ministry. The focus of this year’s research is more on the consequences of climate policy compared to other countries. ‘The ministry wants to know how comparable policies are being implemented abroad,’ explains Tezel. A good example are the different structures of the energy taxes seen in many countries. We are investigating these and many other factors to illustrate the relative position of Dutch policy.’

Cross-border influences

‘Climate policies do not stop at the border and it’s always good to know what the Netherlands is doing in relation to Europe,’ says Muller. ‘It is also important to look at the introduction of the policy measures developed specifically for the Netherlands. What are the consequences for the industry? And what should the government do in terms of mitigation if policies have undesirable consequences for the business community?’

Tezel and Muller and their teams have over recent years developed a methodology that is flexible enough to respond to climate developments and ever-changing policies. Tezel: ‘We continually adjust and sharpen our instruments in order to meet customer expectations and requirements.’

Playing field test every four years

According to Muller, developments in Europe are moving at lightning speed. ‘The EU’s Green Deal Industrial Plan promises more subsidies for sustainability. If you compare this with the far greater subsidies being granted in the United States, however, we are lagging behind. That is why we redo our playing field test every four years and incorporate the latest state of affairs. Electricity prices, for example, can quickly move in a completely different direction as the war in Ukraine has shown.’

Community of solvers

A broad issue such as the effects of climate policy requires an equally broad approach. Muller emphasises the need for knowledge of the micro-economic impact. ‘The issue revolves around more than how to structure policy – it’s also about the concrete application of rules by individual companies. That’s why we have colleagues who are well versed in subsidies and subsidy schemes and colleagues who know everything about areas such as the EU emissions trading system. This is a market instrument with which the EU aims to reduce greenhouse gas emissions cost-effectively in order to achieve its climate goals.’

Economic impact of climate rules

The collaboration with Tezel's team is reflected in the translation into a broader economic analysis, says Muller: ‘Gulbahar and her team look at the implementation of the legislation and regulations in practice. What is the economic impact of those rules and what are the catches? It is precisely this application of broad knowledge that results in in-depth and concrete reports.’ 

Technical specifications

Tezel adds that in addition to colleagues with policy and economic knowledge, colleagues with a technical background also strengthen the team. ‘When researching a subject like decarbonisation, for instance, it is valuable to have a specialist give input on cost estimates with regard to the reduction options. It’s important to me that I also understand which technical specifications lie behind a certain policy.’

Contributing to sustainability

Although Muller and Tezel are still working on the study, they are aware of what the playing field test can mean for the issue of sustainability. ‘It's about finding a good balance between a heavier taxation of emissions and limiting carbon leakage,’ says Muller. ‘You also have to look at the preconditions for making the transition and what you as a government can expect from the business community.’

In conclusion, Tezel makes clear that the playing field test is ultimately about evaluating facts. ‘It's not up to us to make policy…. What we do is provide insight into the facts. It would be nice if the considerations included the facts that our teams manage to uncover.’