Government plans must be temporary, quick to implement and goal-orientated

During a recession many people look to the government for answers. It is the major player when the economy is in decline. Various interest groups (trade unions, industrial organizations) are now calling on The Hague to make the Great Green Gesture: to invest in Sustainability. ECN’s in-house economist Ton van Dril makes his own choices from the range of solutions. He explains his contribution to the government report ‘Effects of the credit crisis on climate and energy policy’.

When the economy is in decline, industry is less productive and CO₂ emissions drop. The government needs to take no action to achieve this. You could almost be grateful for the recession, as it means the Netherlands can achieve its environmental goals without difficulty. A nice thought, but the Netherlands Bureau for Economic Policy Analysis and the Netherlands Environmental Assessment Agency have studied the situation and this sustainability argument won’t wash. Extra measures from the government remain necessary, as this ray of hope is limited solely to a lower growth of the carbon dioxide emission rate. The fact is, investments in energy savings and renewable energy are also suffering from the economic crisis. In disaster situations and economic setbacks, the image of the down-to-earth Dutch comes to the fore: join hands, put your shoulders to the wheel and get down to work. So why not stabilize the economy and improve sustainability by stimulating sustainable and energy-saving projects in the building sector? In the Achterhoek region, for example, they believe that they will emerge from the crisis stronger than ever if they innovate with sustainable, ‘green’ economics.

Not every green plan is a good plan
In his workroom at the ECN Policy Studies unit, Ton van Dril explains with a smile that these initiatives do not surprise him at all. “In a general economic sense, the situation during a crisis is always the same everywhere. The engine has come to a standstill and there is only one powerful body in society that can get it started again: the government. So things get busy in The Hague: manufacturers hold out their hands for government support, interest groups declare loudly which areas the government should give extra assistance. Sustainability is now mentioned frequently, but not every green plan is by definition a good plan. Moreover, investments in sustainability and innovation must be long-term. They are much more important than merely as an interesting option for coping with economic setbacks.”
What is striking about this crisis is that it affects all the economies in the world, Van Dril claims. Now more than ever there is a ‘global economy’, which is best coped with by taking global action. Minister of Finance Bos and Prime Minister Balkenende have also said this, to their credit, but in actuality parochialism rules. Protective social mechanisms come into effect almost automatically so that your first concern is for your own country and economy. “Before you realize it, you are protecting your entire local economy: look at Sarkozy promising protection for the French car industry.”

Plans must be generic
If a government provides support, this support must not be just for a single sector of the economy. Van Dril puts on his ‘purely economic’ cap for a moment. “You must provide generic support, pump money into the whole economy which everyone benefits from equally, such as the reduction of VAT. But politicians make decisions which will satisfy as many people – voters – as possible. So if society is pushing towards sustainability, they will tend to go along with this.” Van Dril goes to his imaginary hat rack, and switches his ‘economic’ cap for his ‘ECN Sustainability’ cap. He continues his argument by declaring that the government must find a strategy to serve both interests. Reducing VAT on ‘green’ products, for example. The VAT reduction represents the generic component and the ‘green’ constraint is the result of the objective of making the economy more sustainable. “But that does not mean that support for every sustainability plan is a suitable way of combating the recession.”
This issue is also discussed in the report ‘Effects of the credit crisis on climate and energy policies’. This report was drawn up by the Netherlands Bureau for Economic Policy Analysis and the Netherlands Environmental Assessment Agency. Van Dril points to the passage describing the requirements that must be satisfied by government measures taken during a recession: they must operate temporarily, take effect quickly and be goal-orientated. He then looks at a number of candidate projects: does investment in CO₂ capture and storage meet the requirements? No, because the technology is not available yet (no quick effect). Assembling electric cars in our only car factory in Born? Perhaps.
Most of the research programmes at ECN have a long-term character. The likelihood that an ECN technology will stimulate the economy during this recession is therefore small. “The best action is to bring forward sustainability projects that have already been developed but are planned for the future,” Van Dril reasons. “Introducing measures to save energy in existing buildings is a good example. The environmental organization ‘Stichting Natuur en Milieu’ also demonstrates its understanding of this with its plan to speed up the construction of wind farms in the North Sea. Both plans satisfy all three requirements.”

Contact
Ton van Dril
ECN Policy Studies
Tel.: +31 (0)22 456 4424
E-mail: Ton van Dril 

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