Environmental transfers and subsidies

Environmentally motivated subsidies provided by the government increased from 764 million euros in 2005 to nearly 1.2 billion euros in 2010. In 2015, it was down to slightly over 1.0 billion euros. Their share in central government expenditure remained more or less stable around 0.6 percent in the period 2005-2015. Environmental transfers decreased from 342 million euros in 2010 to 295 million euros in 2015. Together, the environmental subsidies and other environmental transfers account for 0.7 to 0.8 percent of central government expenditure.

Environmental transfers include the different current transfers and capital transfers. Environmental subsidies include only the so called explicit (or direct) subsidies on environmental protection and resource management, which are direct monetary transfers from the government to companies, i.e. excluding fiscal facilities etcetera. For the total environmental transfers including subsidies a new method of data compilation has started since reporting year 2013, following implementation Eurostats’ guidelines for compilation of Environmental subsidies and similar transfers.

The issue

Environmental subsidies are an important economic instrument in achieving national policy objectives regarding environmental protection and natural resource management. Environmental subsidies are used to promote a wide variety of activities and production processes that are geared towards protection or prevention of harm to the environment, more efficient use of resources and safeguarding of natural resources through improved management.

Analysis

Environmental subsidies and transfers are related to the different environmental issues such as climate change or nature conservation. In the period 2013 – 2015, more than 50 percent of subsidies were devoted to energy savings and production of energy from renewable resources. During this period, by far the largest beneficiary sector for this particular type of subsidy with an average share of 45 percent was the Electricity, gas, steam and air conditioning supply industry (NACE D). For the total environmental transfers, the second largest topic in 2013 – 2015 is the Protection of biodiversity and landscape, which takes place through “Natuurvisie (Vision for Nature)”, an instrument primarily aimed at facilitating other key stakeholders in their nature conservation efforts. This is part of an ongoing development towards decentralisation and serves implementation of nature conservation policies in transition; furthermore, it serves towards compliance with agreements as have been made at EU level on nature conservation, including in the marine spheres.

The Dutch government tries to promote energy efficiency and renewable energy, thereby contributing to climate change mitigation. In 2015, an estimated 870 million euros were dedicated to the most important subsidy scheme, the MEP subsidy (Milieukwaliteit elektriciteitsproductie; Environmental Quality electricity production) and its successors SDE and SDE+ (Stimuleringsregeling Duurzame Energieproductie; the Sustainable Energy Production Incentive Scheme) to encourage renewable energy production. As a rule, approximately one-third of the total subsidy was devoted to wind energy, another one-third to biomass, while 2 percent was put towards photovoltaic solar panels and roughly 1 percent to soil/heat and cold storage and geothermal energy combined.
Environmental-related Implicit subsidies (foregone tax revenues due to various tax rebates) amounted to 500 million euros in 2014. However, these Implicit subsidies were almost halved in 2015, mainly due to cuts in the subsidies granted to stimulate the adoption of hybrid cars.