Energy-savings, incentivise or oblige? - An audit on the overlap in energy-saving policies  

Energy-saving obligation in combination with financial incentives

The Netherlands’ climate goal for 2030 is to reduce atmospheric CO2 emissions by 55% relative to 1990. The government has launched an array of measures to achieve this goal. The main measure taken by the Minister of Climate Policy and Green Growth (KGG) is an energy-saving obligation which was introduced in 1993 to force businesses– from bakeries to brickworks – and institutions – from schools and churches to sports clubs – to reduce their energy consumption. Businesses and institutions that consume more than 50,000 kWh of electrical energy and/or 25,000 m2 of gas (equivalent) are obliged to take all energy-saving measures that will pay for themselves within 5 years.

In a 2024 audit on the effectiveness of this obligation, we concluded that the Minister of KGG was inadequately aware of how much energy it was saving. The expected energy saving would probably not be achieved, in part because far fewer businesses were complying with the obligation than the minister had anticipated. In addition, enforcement of the energy-saving obligation did not meet the minister’s expectations. Many businesses were unaware that they were subject to the obligation or, given the lack of enforcement, deliberately ran the risk of noncompliance. Some businesses, moreover, had to comply with multiple and often contradictory energy-saving requirements (the energy-saving obligation, the energy label C obligation, the EU energy efficiency directive).

Besides the energy-saving obligation introduced for about 107,500 businesses and institutions, the government is encouraging all Dutch businesses and institutions to save energy and reduce energy-related CO2 emissions by means of at least 17 grants schemes, tax schemes and other policy instruments. The financial cost of these schemes in 2024 was at least €1.2 billion. The schemes are shown in figure 1.

Financial cost of the schemes in 2024

in millions of euro's

Possible overlap between financial incentives and energy-saving obligation

Ministers are applying different instruments – an obligation and financial incentives – to achieve the same goal. In recent years, the Climate and Energy Outlook (KEV) and other sources have suggested that the imposition of an energy-saving obligation in combination with financial support may have created a policy overlap. The incentives, it was claimed, would not lead to additional energy and CO2 savings on top of the energy-saving obligation. More money than necessary was thus being spent to achieve the goal and the combination of an obligation and incentives was inefficient.

We investigated whether businesses and institutions received financial incentives between 2019 and 2024 in the form of, for instance, grants for energy-savings that were already obligatory by law. We also asked whether this approach was efficient.

Most schemes have no overlap with energy-saving obligation

We conclude that the incentives largely do not overlap with the energy-saving obligation. We found that in 11 of the 17 schemes we audited ministers prevented, in full or in part, the risk of providing financial incentives for what was already obligatory (see figure 2). Our audit identified 3 ways to prevent overlap:

• ministers excluded businesses subject to the energy-saving obligation from incentive schemes,
• or they excluded energy-saving measures that were or could be obligatory,
• or the technical and/or economic conditions set for incentivised measures differed from those set for obligatory measures. As a result, an overlap with the energy-saving obligation was unlikely.

Ministers prevent or limit overlap in 3 ways

Some schemes possibly overlap with obligatory energy-saving measures

Some incentive schemes possibly overlap with the energy-saving obligation. Our audit found that 4 schemes definitely did overlap with the obligation. Measures have since been taken to eliminate the overlap in 2 of the schemes.

In 4 other schemes, there may be an overlap with the energy-saving obligation but the minister has too little information to determine whether there actually is an overlap. In summary, 8 schemes have definitely or possibly overlapped with the energy-saving obligation and 6 still do.

Where there is an overlap, the ministers are not aware of it or do not know how big it is. We have therefore made an estimate of the financial overlap. In 2023, we estimate that it amounted to €51.4 million at most. In comparison with the total cost of the incentives, the overlap is relatively small (see figure 3).

Limited overlap with energy-saving obligation

in millions of euro's

Overlap between obligation and incentives is not efficient

In our opinion, the overlap between the incentive schemes and the energy-saving obligation is not efficient. Ministers do not know how big the overlap is and lack information to demonstrate its efficiency. As a result, ministers are ‘gifting’ businesses and institutions financial support to implement energy-saving measures that they were already obliged to take.  
 

Lack of coherence in energy-saving policy

In some cases, the overlap between incentives and the obligation is due to the Minister of KGG’s timing of new rules on the energy-saving obligation. Some obligatory energy-saving measures she has introduced already qualified for financial incentives. The result is an overlap. Conversely, other ministers provide incentives without always considering the energy-saving obligation. Energy-saving measures are financially incentivised even though they are obligatory.

Good examples

The government already has the solution to this problem. In the majority of the incentive schemes, ministers actively prevent an overlap with the obligation. The government can use the good examples to improve schemes that overlap with obligatory energy-saving measures.

Recommendations

We recommend that the Minister of KGG, the government as a whole and the ministers responsible for energy-saving incentive schemes:

• exclude obligatory energy-saving measures from financial support, unless such support is effective and efficient. Learn from the good examples that are available.

We recommend that the Minister of KGG, as the minister responsible for the energy-saving obligation:

• time the introduction of new rules on the energy-saving obligation to allow for plans to incentivise energy-saving measures.