## Emerging Climate and Energy Transition Issues: Kingdom of the Netherlands - The Netherlands

_Selected Issues Papers, November 26, 2025_

## Source details

**Canonical URL:** [Emerging Climate and Energy Transition Issues: Kingdom of the Netherlands - The Netherlands](https://www.imf.org/en/publications/selected-issues-papers/issues/2025/11/26/emerging-climate-and-energy-transition-issues-kingdom-of-the-netherlands-the-netherlands-572156)

## Other formats

- [Markdown version](/en/publications/selected-issues-papers/issues/2025/11/26/emerging-climate-and-energy-transition-issues-kingdom-of-the-netherlands-the-netherlands-572156/index.md)
- [Structured JSON version](/en/publications/selected-issues-papers/issues/2025/11/26/emerging-climate-and-energy-transition-issues-kingdom-of-the-netherlands-the-netherlands-572156/index.json)
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## Bibliographic details
- Authors: Ian W.H. Parry, Nate Vernon-Lin, Alberto Garcia Huitron, Cristian Chagalj, Sunalika Singh
- Published: November 26, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229032629.018

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### Summary
- Examines two key challenges for the Netherlands: distributional impacts of EU ETS reforms and the fiscal, environmental and power sector effects of road transport electrification.
- Expanded carbon pricing through ETS2 and CBAM affects households via multiple channels, with broadly even consumption impacts but shifting incidence from pass-through and free-allowance changes.
- The current vehicle electrification rate, while essential for emissions goals, erodes transport tax revenues, increases grid demand, and yet still leaves road emissions above targets.
- Pages: 25
- Volume: 2025
- Issue: 147
- Series: Selected Issues Paper No. 2025/147
- DOI: https://doi.org/10.5089/9798229032629.018
- Stock No: SIPEA2025147
- ISBN: 9798229032629
- ISSN: 2958-7875

### Distributional impacts of EU ETS reforms (ETS2 and CBAM)
- Key finding: Expanded carbon pricing through ETS2 and CBAM affects households via multiple channels.
- Incidence detail: Consumption impacts are broadly even across households, but incidence shifts arise from pass-through of carbon costs and changes in free-allowance allocations.
- Implication: Redistributional effects depend on how pass-through and free-allowance adjustments are implemented.

### Fiscal, environmental, and power sector effects of road transport electrification
- Key finding: The current vehicle electrification rate:
  - Erodes transport tax revenues.
  - Increases grid demand.
  - Still leaves road emissions above targets.
- Implication: Electrification alone is insufficient to meet road emissions targets without complementary policies and revenue adjustments.

### Policy options and recommendations
- Road-user charging to:
  - Address equity concerns.
  - Stabilize revenues.
  - Manage non-climate externalities.
- Fuel tax adjustments to offset revenue erosion from electrification.
- Congestion pricing to target urban externalities and demand management.
- Targeted support to protect vulnerable households during transition.
- Overarching aim: Use combinations of the above to sustain progress toward climate targets while addressing distributional and fiscal challenges.

*Ian W.H. Parry, Nate Vernon-Lin, Alberto Garcia Huitron, Cristian Chagalj, and Sunalika Singh. "Emerging Climate and Energy Transition Issues: Kingdom of the Netherlands - The Netherlands", Selected Issues Papers 2025, 147 (2025).*

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## Content in this bundle

- **2.   Distributional Impacts Across Scenarios**
  - [2.   Distributional Impacts Across Scenarios (Markdown version)](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025147.pdf.md){rel="alternate" type="text/markdown"}
  - [2.   Distributional Impacts Across Scenarios (PDF)](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025147.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/11/26/emerging-climate-and-energy-transition-issues-kingdom-of-the-netherlands-the-netherlands-572156_