Tata Steel deal a "subsidy trap" that could cost government millions: study

Tata Steel could potentially receive hundreds of millions of euros in additional government support each year until 2040, according to researchers from the Stichting Onderzoek Multinationale Ondernemingen (SOMO) in the economics journal ESB.

Last September, the caretaker for Minister of Climate and Green Growth Sophie Hermans signed a letter of intent with Tata Steel, in which the government committed to providing up to 2 billion euros in one-time subsidies to support the company’s sustainability initiatives.

The research notes that the letter of intent contains six further government commitments that could lead to significant yearly extra expenses. These cover future biomethane subsidies, support for a CO2 storage project in the North Sea, and compensation for increasing network costs. “As a result of these commitments, the real costs will be considerably higher.”

Tata Steel and the Ministry of Climate and Green Growth reject the conclusions of the study. They note that the agreement merely commits the government to making reasonable efforts, so no binding obligations currently exist.

The ministry also highlights that Tata Steel’s transition to greener operations would lead to a substantial drop in the Netherlands’ CO2 emissions.

SOMO’s report points out the uncertainty in the biomethane market: Dutch production is currently too low to satisfy Tata Steel’s needs. Meeting that demand would require government action, and the costs of such intervention are hard to estimate.