Replace fossil fuels for companies with investment support

Tycho Van Hauwaert

Political adviser to Bond Beter Leefmilieu

The Flemish government must take advantage of the energy policy agreements with the companies. Companies can be made climate neutral through modernization, which is the logic in itself in 2022.

For twenty years now, Flanders has been using energy policy agreements (EBOs) to encourage energy-intensive companies to become more energy efficient. The current agreements expire at the end of this year.

The government is using the instrument to encourage companies to operate more sustainably. In the current and previous agreements, the focus was only on improving energy efficiency through investments that pay for themselves in the short term.

The essence

  • The author: Tycho Van Hauwaert is an industry expert at Bond Beter Leefmilieu.
  • The case: Subsidies to fossil fuel companies are completely obsolete.
  • The proposal: Replace the subsidies with investment support for a climate-neutral industry

Twenty years ago, it was a noble goal, but with the gigantic challenge of becoming climate neutral by 2050, it is no longer enough. Flanders in 2050 will not benefit from highly efficient companies making non-sustainable products. The energy policy agreements must therefore focus on a climate leap.

If we do not adapt the instrument, there is a threat of a so-called ‘carbon lock-in’, where our industry will for a long time click on existing installations that run on fossil fuels. Because our companies have previously invested so much in these installations, they tend to use them for as long as possible.



The energy policy agreements must focus on a true climate leap.

Tycho Van Hauwaert

Expert industry at Bond Beter Leefmilieu

Therein lies a risk. Instead of going through their processes thoroughly, they choose the exact same process with a candy green paint. So we miss the boat. In the end, our industry is left with installations and processes that are no longer worth anything. If the Flemish government wants to protect industry from this, it must intervene in the EBOs and seek a balance between the short-term (small leaps in energy efficiency) and the long-term (a climate-neutral industry).

Strategy

Taking such a leap requires foresight. Therefore, it is crucial that the companies that enter into the new agreements develop a climate strategy. They must ask themselves what products they will offer in the climate-neutral and circular society by 2050. In addition, the industry’s climate plans must be shared with society and civil society in all transparency.

Many Flemish companies are not waiting for a government initiative and are already taking action. Under the umbrella of the Belgian Alliance for Climate Action (BACA) and through the International Science Based Targets Initiative, they are committed to achieving challenging climate goals and developing new products that secure their leading position in the climate-neutral economy of the future.

The new energy policy agreements should take this as an example. Their goal should be to make the good practices of the pioneers common in Flemish industry. If Flanders misses this opportunity, it risks being overtaken by other European regions. The EU is also planning to set up an EU business initiative itself.

Compensation

The financial compensation for participation in these agreements must be thoroughly reformed. Today, companies receive a discount on the cost of fossil energy (reduction of taxes on natural gas) and a discount on the cost of CO emissions (compensation for indirect emissions). This is counterproductive and contrary to the objectives of the European Green Pact.



Government support for industry in 2022 is only possible if we eventually get a climate-neutral industry instead.

Tycho Van Hauwaert

Expert industry at Bond Beter Leefmilieu

It is also expensive, because if we compare these benefits with the companies with what the current agreements provide for CO₂ reduction, we arrive at a price of around 900 euros per. tonnes avoided CO₂. That is more than ten times what an emission quota costs in the European trading system.

The Flemish government must put things in order. In 2022, state aid to industry will only be possible if, in the long run, we get a future-oriented and climate-neutral industry instead. Therefore, the government must replace these fossil subsidies with investment support that encourages the much-needed modernization of our industry. Otherwise we risk losing the agreement with the future.

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