The US shale boom has created a large natural gas price disparity that is hurting Dutch manufacturing competitiveness and industrial production. Dutch policymakers have to balance desires to combat climate change through reducing CO2 emissions and improving energy efficiency, to improve economic outcomes by ensuring a healthy, competitive industrial sector with plenty employment, production, investment and thus economic growth. Finally, policymakers have to ensure an optimal amount of tax revenue to finance an extensive welfare state.
Dutch policymakers should reduce the natural gas tax for industrial firms from its current average of €0.048 to the EU imposed minimum standard of €0.0057 per cubic meter. Maintaining the status quo would favor climate policies over industrial competitiveness and growth, and would maintain the large natural gas price disparity between the US and the Netherlands while keeping tax revenues neutral.
Cutting the natural gas tax rates to €0.0057 per cubic meter would:
- Reduce industrial natural gas prices by 10 percent
- Decrease the US-Netherlands natural gas price gap by 16 percent
- Improve industrial competitiveness by 0.30 percent
- Boost industrial employment, labor and corporate tax revenues and economic growth
- Increase CO2 emissions
- Decrease energy tax revenues by approximately €730 million
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