## Economists Urge Caution on Industry Bailouts Amid Factory Closures in Europe

Rotterdam, Netherlands – As factories shutter in Europe due to rising energy costs, a group of thirteen economists is cautioning governments against large-scale financial support for energy-intensive industries. The economists argue that such bailouts predominantly benefit large corporations that heavily rely on gas and petroleum, and that taxpayer money could be better utilized elsewhere. this comes as the Dutch Lower House debates potential subsidies for heavy industry amid concerns about the long-term viability of manufacturing in the Netherlands and the broader European Union.

The core issue, according to the economists, centers on the “basic industry,” which encompasses factories producing fundamental materials like steel and chemical products. These materials are crucial for various downstream industries, but the processes involved frequently enough require substantial energy consumption.

karen Maas, director of the Impact Center Erasmus, pointed out that these same companies requesting government assistance had amassed important profits in recent years. “Fossil companies that now ring the bell about the energy costs are the same companies that have made a lot of profit in recent years,” she stated. “They could have used that money themselves to make it more lasting.” In the U.S., this debate echoes similar discussions around subsidies for fossil fuel companies and the allocation of funds for renewable energy initiatives.This week, chemical giant Lyondellbasell and pigment manufacturer Tronox announced the closure of factories in the port of Rotterdam, resulting in the loss of approximately 300 jobs. Lyondellbasell confirmed that it would close its factory on the port of Rotterdam. this follows similar trends observed across Europe,raising anxieties about deindustrialization.

These closures exacerbate concerns in regions like Rozenburg, a town near Rotterdam, where heavy industry plays a vital economic role. Ria de Sutter-basters, former mayor of rozenburg, explained, “You lose industry, you lose knowlege. In the long term, it is really just a disaster for the village. The industry simply produces prosperity for ordinary citizens in Rozenburg.” Highlighting the local impact of a global economic issue. De sutter-basters lamented the closure of Lyondellbasell’s factory, noting that Rozenburg residents were questioning why such a new and well-maintained facility had to be shut down. She said “The people in Rozenburg are wondering, how is that possible? Why does such a lovely factory have to close barely 20 years old,” and further that “We have to stop running behind that climate transition and wanting to be at the forefront.”

While the economists acknowledge the potential downsides of shuttering factories, they contend that the overall impact on the Dutch economy may be less significant than some fear, arguing that just 50,000 people work in this sector. They also raise questions about the feasibility of supporting these industries and the country being sustainable when there is shortage of labor in the energy sector.

However, a potential counterargument is that the U.S. and Europe may become overly reliant on foreign manufacturers or in regions where environmental regulations are less stringent. The economists addressed this concern, arguing that Europe must also be self -reliant and that basic products must be made at home.

Karen Maas, however, questions the need for the companies to be solely in the Netherlands saying “Europe must also be self -reliant, especially in view of the current situation”. She further says “I don’t argue that we chase away all chemical and steel companies from Europe.But the question is that companies have to be in the Netherlands? We are a small country, have many problems with the energy networks and have a shortage of labor.”

According to the economists, the industry must be distributed differently across europe. maas gave an example stating “In Spain, for example, there is room and through the sun there is a lot of green energy available. Within Europe, we can better see where certain companies should find their place, so that Europe can protect and support itself.”

The economists’ letter, signed by: barbara Baarsma (University of amsterdam),Roel beetsma (University of Amsterdam),marjan Hofkes (VU University Amsterdam),Karen Maas (Erasmus University),Robbert Maseland (Radboud University),Mark Sanders (Maastricht University),Florian sniekers (Tilburg University),hans Stegeman (Erasmus School of Economics),Rens van Tilburg (VU University Amsterdam),Harmen Verbruggen (VU University Amsterdam) and Dennis Vink (Nyenrode Business University),underscores the complexity of balancing economic realities,environmental concerns,and geopolitical considerations in a rapidly changing global landscape.

What are the long-term economic consequences of relying on bailouts for energy-intensive industries rather of investing in renewable energy and energy-efficient infrastructure?

Interview: Industry Bailouts and the Future of European Manufacturing

Archyde News recently spoke with Dr. Anya Sharma, a leading economist specializing in European industrial policy and energy efficiency at the Institute for Economic Strategy, about the ongoing debate surrounding industry bailouts amid factory closures across Europe.

The Core Issue: Energy Costs and Industry Viability

Archyde News: Dr.Sharma, thank you for joining us. The closure of factories, particularly in energy-intensive sectors like chemicals and steel, is causing significant concern. What are the primary drivers of these closures?

Dr. Sharma: Thank you for having me. The primary driver is undoubtedly the surge in energy costs. Many of these factories rely heavily on natural gas and petroleum, and the price volatility has made it incredibly difficult to maintain profitability. Coupled with increased environmental regulations, it is difficult to remain cost-competitive which results in the need to close down factories.This isn’t just a Dutch problem, it is indeed a wider European Challenge.

The Debate: Bailouts vs.long-Term sustainability

Archyde News: There’s a heated debate about government bailouts. What are the main arguments against providing extensive financial aid to these industries?

Dr. Sharma: Many economists, myself included, believe these bailouts primarily benefit large corporations that frequently demonstrated ample profits over recent years. Providing government aid essentially rewards companies for short-sighted planning and lack of investment in enduring energy infrastructure. Taxpayer money could be allocated more effectively to support renewable energy projects, job retraining programs, and energy-efficient infrastructure upgrades, ensuring a just transition to a sustainable economy. We should not be subsidizing fossil fuels, while they could be used to create a lasting economy.

Finding a Solution: A Question of Distribution

Archyde News: the concern about deindustrialization is understandable. How can Europe balance the need to maintain a robust industrial base with the imperative of transitioning to a greener economy?

Dr. Sharma: it requires a multi-faceted approach. We need to think about the distribution of industry across Europe. Not every country is ideally suited for every type of manufacturing. Some regions have abundant renewable energy resources, such as solar potential in Spain, which could be attractive to relocate or support certain types of energy-intensive industries. It’s essential to support innovation and develop new manufacturing processes based on new technologies and sustainable energy sources.

Economic Impact and the Future

Archyde News: There is concern about the loss of jobs and knowlege. However, the economists claim that the overall impact on the economy may be less than expected. what are your thoughts on the potential impact and the future?

Dr. Sharma: The impact on the economy may be less significant than what some fear. Though, the potential loss of expertise in manufacturing is still a point of view. It does raise the question, if Europe becomes overly reliant upon other nations: how will it make up the loss?

Looking Forward: A Call to Action

Archyde News: Dr. Sharma, thank you for your insights. What key advice would you offer policymakers navigating this complex situation?

Dr. Sharma: Policymakers should prioritize long-term sustainability and the overall economic health of the EU. Encourage innovation in energy efficiency as that is one of the most effective and fastest options for companies to support a sustainable economy. They must carefully consider the long-term implications of any financial assistance to ensure that it does not simply prolong the inevitable. A shift towards investing in renewable energy infrastructures and focusing on the entire life cycle of all manufactured products, rather than rapid fixes, is the only way forward.

archyde News: Thank you again, Dr. Sharma.

We’d like to hear your thoughts. Do you think government bailouts for energy-intensive industries are a viable solution in the long run? Share your opinions in the comments below.