The Netherlands has been a major producer and exporter of natural gas since the 1960s, when the massive Groningen field was developed. Though its share has been decreasing for several years to the advantage of renewable energy, natural gas still covered 43% of the total energy supply in 2021. These resources are nearing exhaustion that in 2021, production levels were less than one-third of outputs recorded in 1990. In 2018, natural gas imports exceeded domestic production for the first time, with the share of imports further increasing each year until 2020. It has been decided that the Groningen field will close by mid-2022. In June 2019, the Dutch government approved the Climate Agreement which targets a 49% reduction in GHG emissions to below 48.7 MtCO2 by 2030 with indicative goals for set for the electricity, industrial, transport, agricultural and built environment sectors. Consistent with this, a new law was passed in December 2019 that calls for the phase out of coal in electricity production by 2030. The law stipulates that the remaining four coal power plants in the country must discontinue coal use by the end of 2029 at the latest.
OECD Inventory of Support Measures for Fossil Fuels: Country Notes
Netherlands
Energy resources and market structure
Source: IEA (2022), "World energy statistics", IEA World Energy Statistics and Balances (database).
The Dutch energy industry is mostly private, but the state, the provinces, and municipalities retain a structural role and ownership in the natural gas and electricity sectors. The upstream oil and gas sector is entirely private and liberalised. NAM (Nederlandse Aardolie Maatschappij), a Royal Dutch Shell-ExxonMobil joint venture, operates Groningen and hence is the largest producer of natural gas. Smaller onshore and offshore fields are operated by a variety of private oil and natural gas companies. All the refineries and distribution and retailing networks are privately owned.
State-owned Gasunie, through its affiliate Gasunie Transport Services B.V. (GTS), owns and operates the natural gas transmission network. GasTerra, a trading and supply company which is owned 50% by the state, sells domestically produced gas in the Netherlands. The other half is owned in equal parts by Shell and Exxon and is the dominant player in the wholesale market with a share exceeding 70%. Three large supply companies – Eneco, RWE-Essent, and Vattenfall-Nuon – dominate the retail market. Under a 2006 law mandating ownership unbundling of distribution companies, distribution assets must be fully separated from supply activity, and cannot be sold to private companies or investors. Competition in the retail natural-gas market is thus well developed. Unlike in most other EU countries, a relatively large proportion of small consumers have hence switched away from the incumbent suppliers.
Electricity-generating assets are partly privately owned and partly owned by provincial or municipal governments. However, foreign energy companies have overtaken a few major players over the last years. The country’s transmission system operator, TenneT, is fully owned by the state.
Energy prices and taxes
The prices of fuel and energy services in the Netherlands are entirely set by the market. Retail electricity and natural gas tariffs, however, are subject to regulation so as to provide a safety net to consumers. The national regulator, the Office of Energy Regulation (Energiekamer) within the Authority for Consumers and Markets (ACM), is responsible for approving all tariffs and for ensuring that prices charged to consumers are reasonable. In addition to VAT, excise taxes and a special compulsory storage fee ((entraal Orgaan Voorraadvorming Aardolieproducten [COVA]) for the country’s strategic oil stocks are levied on the sale of petroleum products. An energy tax is levied on the consumption of electricity and natural gas with the rates declining strongly as consumption amount increases. A reduced energy tax rate applies for natural gas used for heating in the horticulture sector.
Figure 2. Total tax rebates and support for fossil fuels in the Netherlands
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Recent developments and trends in support
The Netherlands is continuously evaluating its energy tax expenditures and subsidy programmes as part of its commitment to a “greener” tax system in line with its climate and low-carbon energy transition objectives. The most recent review with a letter to the Dutch parliament published in September 2020 resulted in 13 self-identified fossil-fuel support measures ranging from oil and gas extraction support, to energy tax exemptions in economic sectors such as horticulture, energy-intensive processes, electricity generation or in maritime transportation. One of the major support programme for end-users is the reduced energy tax rate specific for horticulture recording EUR 138 million in foregone revenues in 2020 (and EUR 154 million as 2021 forecast). Energy tax refund schemes are also provided to energy-intensive businesses, claimable as electricity tax bill refunds. It is endeavoured that the review of these self-identified support policies promotes the transparency of government budgets and foster greater accountability for the use of public resources.
COVID-19 has brought major upheaval in the fossil fuel markets with record falls in oil prices and slump in energy consumption brought by pandemic mobility restrictions. In the wake of the pandemic, a number of fossil fuel support measures have been announced or launched in the Netherlands, mainly benefitting fossil fuel consumers. For instance, in March 2020, the Dutch government announced that coal users in the industrial and utility sectors are granted a deferral on coal taxes with programme effectivity extended up until August 2020. There has also been announced deferrals for the CO2 tax for passenger cars and motorcycles, benefitting private and corporate vehicle owners. Due to the economic uncertainties in the wake of the pandemic, the government also announced a deferral of payments for energy tax, with businesses now allowed to settle dues in December 2020 (instead of April-October 2020).
The fiscal cost of support measures for fossil fuels in Netherlands was estimated at EUR 22.97 billion in 2022 (Table 1). Ninety-nine per cent (99%) was directed at end user beneficiaries, as opposed to 1% directed to firms. Support was mainly given out in the form of tax expenditures (EUR 14.46 billion) accounting for 63% of the total fiscal cost of support measures. Direct transfers amounted to EUR 8.52 billion.
The fiscal cost of support measures for fossil fuels has increased by 2966% since 2017. Since last year, tax expenditures have increased by 25%, from EUR 11.48 billion to EUR 14.46 billion and direct transfers increased by 10889%, from EUR 0.11 billion to EUR 8.52 billion. All growth rate percentages above are expressed in terms of nominal national currency amounts.
Table 1. Fiscal cost of support measures for fossil fuels (in billions of national currency)
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
|---|---|---|---|---|---|---|
|
Tax expenditures |
0.688 |
0.685 |
10.836 |
11.730 |
11.477 |
14.458 |
|
Direct transfers |
0.062 |
0.061 |
0.031 |
0.077 |
0.110 |
8.516 |
|
Total |
0.749 |
0.746 |
10.868 |
11.808 |
11.587 |
22.974 |
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.
Table 2. Selected support measures for fossil fuels with a large fiscal cost (in billions of national currency)
|
Measures associated with large fiscal cost in 2022 |
2022 |
2017 |
Variation since 2017 |
|
|---|---|---|---|---|
|
Tax expenditures |
|
|||
|
Energy tax reduction (fixed amount per electricity connection) |
3.276 |
(Started 2022) |
3.276 |
|
|
Energy tax cuts for households |
2.904 |
(Started 2022) |
2.904 |
|
|
Reduction value-added tax on energy |
2.541 |
(Started 2022) |
2.541 |
|
|
Direct transfers |
||||
|
Energy support to households |
5.200 |
(Started 2022) |
5.200 |
|
|
Allowance (energietoeslag) for low-income households |
2.906 |
(Started 2022) |
2.906 |
|
1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports).
2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.
3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.
4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.
Source: OECD Inventory of support measures for fossil fuels (2023).
Table 3. Description of selected support measures for fossil fuels
|
Energy tax reduction (fixed amount per electricity connection) |
Energy tax reduction, the energy tax includes a refund of energy tax per electricity connection to a WOZ property with a residential function. All households and companies with an electricity connection receive this tax credit. Households benefit relatively more from this refund than companies. Currently, the energy mix in the Netherlands for natural gas and electricity is still predominantly of fossil origin. As the energy mix becomes more sustainable, the size of the fossil benefit within the tax credit decreases. In 2023, the tax reduction will be EUR 493.27 excluding VAT. Complete phasing out of the scheme could be implemented from 1 January 2025 through a parameter adjustment if this is decided in the spring of 2024 and this decision is included in the 2025 Tax Plan. The abolition of the scheme is a structural adjustment, which requires an implementation period of 4 to 18 months and can therefore not be realised until 1 January 2026, at the earliest. |
|
Energy tax cuts for households |
Energy tax cuts for households (average EUR 400 cut) and business plus home insulation investment (EUR 150 million) Total cost EUR 3.2 billion. |
|
Reduction value-added tax on energy |
Starting in July 2022 the Netherlands reduced its value-added tax on energy from 21% to 9% as part of an effort to stem rising inflation (alongside reducing excise taxes). The total cost of all measures announced is EUR 2.8bn, which also includes an increase of energy allowance to EUR 800 and additional energy-saving measures of EUR 150 million. |
|
Energy support to households |
Vulnerable households will receive energy support of EUR 1,300. |
|
Allowance (energietoeslag) for low-income households |
The government is introducing new supplementary measures to cushion the impact of rising energy prices and persistent inflation on low- and middle-income earners. Inflation may rise substantially this year, possibly reaching 5.2%. This is due mainly to higher energy prices. At the end of 2021, the previous government announced it would set aside EUR 3.2 billion to reduce energy tax. It also presented plans for a one-off energy allowance of around EUR 200 per household to mitigate the impact of higher energy costs on people on incomes around the level of social assistance benefit. Older people on low incomes will also be eligible for the allowance. This one-off payment will now be raised to EUR 800 per eligible household. In the debate on the Spring Memorandum on 5 July 2018, the government announced it to increase the target amount of the one-off energy surcharge again, from EUR 800 to EUR 1 300. |
|
Reimburse costs of energy-intensive SMEs |
The government is allocating EUR 3.1 billion to a scheme to hold down the energy bills of energy-intensive small and medium-sized enterprises (SMEs). This is being set at EUR 1.19 per cubic metre of gas and EUR 0.35 per kilowatt-hour of electricity. SMEs whose energy costs correspond to a minimum of 12.5% of their turnover receive compensation of up to EUR 160 000 through the Energy Cost Allowance (TEK) scheme. These energy-intensive SMEs receive compensation of 50% of the energy cost increase above a fixed so-called threshold price. The expected cost of the TEK could amount to approximately EUR 3.1 billion. The support package is for companies with up to 250 employees whose energy costs amount to at least 7.5% of sales and which consume at least 5 000 cubic metres of gas or 50 000 kilowatt hours of electricity per year. Each company can receive a maximum of EUR 160 000. The energy-intensive SMEs will be compensated for 50% of the energy cost increase above a certain threshold price. This is being set at EUR 1.19 per cubic metre of gas and EUR 0.35 per kilowatt-hour of electricity. |
Data sources
Note on the Methodology
Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.
The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.