Netherlands: ESG proposals introduced on Budget Day

The government’s 2025 Tax Plan submitted to the lower house of Parliament on September 17, 2024 (Budget Day) (read TaxNewsFlash) included the following proposals related to environmental, social, and governance (ESG):

As part of the government’s plans for the coming year, it introduced several environmental, social, and governance (ESG) proposals.

• End of netting scheme for low-volume users: The netting scheme, which allows consumers to offset the electricity they supply to the grid against the electricity they consume, would be discontinued starting January 1, 2027. This change aims to incentivize consumers to use their self-generated renewable electricity more efficiently and to consume it themselves rather than supplying it back to the national grid. As a result, consumers would no longer receive tax benefits for supplying self-generated electricity back to the grid, thereby reducing the strain on the energy system.
• Changes to energy tax: Hydrogen would be taxed at a separate, lower rate compared to natural gas starting January 1, 2026. This change is intended to create a fiscal incentive for replacing natural gas with hydrogen. Additionally, the tax rates for natural gas would be adjusted—small consumers would benefit from reduced rates to lower household energy bills, while large consumers would face increased rates to balance the fiscal impact.
• CO2 levy adjustments: Several adjustments would be made to the CO2 levy. For the industry, waste incineration plants would receive fewer exemption rights. In the greenhouse horticulture sector, the government will explore the possibilities of exempting green gas from the CO2 levy next year. Furthermore, the waste tax would be clarified to ensure that CO2 emissions from waste incineration, released via chimneys, are not deductible, despite ongoing appeals.
• Coal tax adjustments: Starting in 2027, certain exemptions within the coal tax would be eliminated. This move is part of a broader effort to reduce reliance on fossil fuels and promote cleaner energy sources.
• Government programme initiatives: The government has outlined several initiatives in its programme:
  • A distance-based flight tax would be introduced in 2027, replacing the current flat-rate tax. This change aims to better reflect the environmental impact of flights based on their distance.
  • In 2028, a plastic levy would be introduced, following the lead of countries like Spain, England, Germany, and Italy.
  • Additionally, the Dutch government will focus on further phasing out fossil fuel subsidies, particularly tax exemptions and reduced tax rates, in alignment with European efforts to promote sustainable energy practices.

Read a September 2024 report prepared by the KPMG member firm in the Netherlands that also covers other ESG-related developments:

• Carbon Border Adjustment Mechanism (CBAM): Route towards actual emissions data
• Dutch tax incentives