Weighing informed arguments in climate policy

Which climate policy is the most effective, and what are the consequences for firms and industry? And do they contribute equally to the climate transition? How to value and trade off of arguments about employment and investment in companies in the economic and political debate? A team of researchers led by environmental economist Inge van den Bijgaart of the Utrecht University School of Economics (U.S.E.) will be conducting research around these topics over the next five years. Their research will provide insights into important policy choices in the climate transition. I find it interesting to gain insight into which arguments carry greater weight or, rather, when they do so, says Van den Bijgaart.

For the research program ‘Climate policy for heterogeneous firms’, Inge van den Bijgaart was awarded a VIDI grant by NWO. In the coming years, she and her team consisting of PhD students and a Postdoctoral scholar will conduct research into the effects of climate policy on firms. The program will run until 2030.

Effect of climate policy on businesses and households

The economy has been decarbonizing in recent years, but in order to achieve climate goals, a lot of work still has to be done. An important question now and in the coming years is how we are going to achieve this, and especially how the costs will be distributed. 

Effects of climate policy in The Netherlands

Within this project, we will use Dutch data to gain insights into the effects of climate policy in the Netherlands. For thorough research, it is important to understand the context well, and then it can be beneficial to stay close to home, says Inge van den Bijgaart. This also provides opportunities in setting up partnerships. We will work collaborate with other researchers and knowledge institutions, such as the Netherlands Environmental Assessment Agency, the Netherlands Bureau for Economic Policy Analysis (CPB) and TNO.

Cornerstone of climate policy: the European Emissions Trading System

The most important climate policy in the Netherlands is the European Emissions Trading System (EU-ETS), says Inge van den Bijgaart. That system, in which companies have to purchase emission allowances, is the cornerstone of climate policy in Europe – and therefore also in the Netherlands. That may not be apparent to the average newspaper reader, and it also receives less attention in the political discussion in The Hague. We know that the EU-ETS has been effective. It has brought about green innovation and CO₂ emission reductions, with only had limited costs so far when you consider job or revenue losses for firms.

However, not all firms and sectors are  currently part of the system, and it is expected that prices will rise and emissions will fall in the coming years. A price of up to 40-50 euros per ton of CO₂ apparently is not painful, but does that also apply if it becomes 140-150, or 200?

We do need insight into the distribution of costs and dependencies within the economic system

Climate goals and competition

The climate goals will not be achieved with the current policy. This applies to the world as a whole, and also to the Netherlands. The previous government priorities were more short term. This is unfortunate, because even on the basis of a simple cost-benefit analysis, the global costs of climate change are many times higher than the costs of emission reductions. In any case, we do need insight into the distribution of costs and dependencies within the economic system.

For example, while we coordinate climate policy in Europe through the EU-ETS system, there is also some degree of competition on industrial policy. Everyone wants to retain certain industries, but we risk a subsidy race. That is not desirable, because it mainly benefits those firms and not the broader society of the countries in question, we know that from research.

Weighing informed arguments

A lot of valid arguments are given in the political discussions around climate policy, says Van den Bijgaart. For example: 'if companies fail, many people will lose their jobs'; 'climate change is a big problem, we have to do something about it'; 'we can only spend every euro once, so if we spend it on investments in companies, we cannot spend it on healthcare, or we will have to raise taxes for that'; 'If you tax companies in the Netherlands, they may move their production elsewhere'. These are all good arguments. From a scientific point of view, I find it interesting to gain insight into which argument carries greater weight or: when it does so.

Less climate policy or a different type of climate policy

For example, does the argument of job losses imply that you should do less climate policy or should you pursue a different type of climate policy? Without thorough scientific research and a team of people who think about such questions in a transparent way, this will not be apparent.

I am really inspired by these kinds of societal debates, specifically in the field of climate policy. With our research, we hope make an effective contribution to the debate and to making choices. With the help of data and models, blind spots are made less blind, arguments are better weighed and hopefully simplistic conclusions are prevented from being drawn too quickly.

The collaboration and knowledge exchange with organisations such as TNO, PBL and CPB, which also consider our research important, is very valuable, and we can learn a lot from them. Together we can conduct scientific research at a global level, and make it directly relevant in the exchange with policymakers and politicians here in the Netherlands.

Research team

The research team consists of: Inge van den Bijgaart (project leader), Leon Bremer, Laura Egelmeers, and Koert Rang. Laura Egelmeers brings knowledge from previous research, for example about production networks, and Leon Bremer about climate policy in the Netherlands and its effects on industry.

More information

If you would like to know more about this project, please contact Inge van den Bijgaart (project leader): i.m.vandenbijgaart@uu.nl.