Belgium has negligible economically recoverable resources of fossil energy and relies heavily on imported energy products. As of 2016, net imports were meeting more than 80% of the country’s total energy supply (treating nuclear power as indigenous production). Coal was once the main indigenous energy source, but Belgium’s last coal mine closed in 1992.
OECD Inventory of Support Measures for Fossil Fuels: Country Notes
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Belgium
Energy resources and market structure
Source: IEA (2022), "World energy statistics", IEA World Energy Statistics and Balances (database).
The self-declared principal goals of Belgian energy policy are the security of supply through the diversification of geographical sources of supply and fuels, energy efficiency, transparent and competitive energy pricing, and environmental protection and climate-change mitigation. At a regional level, energy policies prioritising energy efficiency and the generation of electricity from renewable sources are being progressively adopted. At the same time, a key policy objective is the phase-out of nuclear energy at the national level. Accordingly, a 2003 law prohibits the construction of new nuclear plants and sets a 40-year limit on the operating lifetime of existing plants. Amendments adopted since then provide for the shutdown of all the country’s seven reactors between 2022 and 2025. With soaring energy prices following Russia’s large-scale aggression over Ukraine in February 2022, the government has announced a postponement of the planned 2025 phase-out by another ten years. In 2021, nuclear energy has been taking on an increasing importance, accounting for 51% of Belgium’s electricity generation, notably at the expense of natural gas (23%) and renewable technologies (23%).
Belgium’s energy sector is almost entirely in private hands, though some local distribution of electricity and natural gas is carried out by companies that are wholly or partially owned by municipalities. The gas and electricity markets have been fully opened to competition, as required under EU law, but traditional suppliers, notably Engie and its subsidiary Electrabel, continue to command dominant positions. The national regulator, the Electricity and Gas Regulatory Commission (CREG), is mainly responsible for approving transmission and distribution tariffs and market monitoring. Each of the three regions has its own regulatory body, which is primarily responsible for approving local distribution tariffs.
Energy prices and taxes
As required by EU directives, there are no price controls on energy as such. However, the central government maintains a system of price ceilings on the main oil products under an agreement (known as the contrat de programme or programmaovereenkomst) with the national oil industry federation. These ceilings are intended to act as a cushion against sudden price spikes. Meanwhile, the CREG and regional regulators set network charges for electricity and natural gas, but do not have the legal means to control electricity or gas prices charged to most final consumers. Nevertheless, faced with a rapid rise in final energy prices, the central government decided in 2012 to freeze retail prices for natural gas and electricity. Standard rules for setting retail energy price rises have since been adopted in the context of the so-called “safety net” (filet de sécurité or vangnet), allowing the CREG to reject an indexation formula deemed excessive up until December 2017, when this measure terminated.
Figure 2. Total tax rebates and support for fossil fuels in Belgium
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.
Recent developments and trends in support
There exist several tax preferences related to energy consumption in Belgium. By total support value, the largest of these measures are the excise-tax reductions applied on certain professionals and residential users on their consumption of petroleum products and natural gas. As of 2016, eligible users included energy-intensive firms and those possessing an environmental permit, which further increased the amount of support estimates in the Inventory. Fuels used in agriculture also qualifies for excise tax exemptions on fuels used in agriculture. Several direct transfer programmes are also used to provide support for the consumption of natural gas and electricity by low-income and other marginalised households. In 2022, Belgium discontinued some support low-income households. However, one-off support and new programs introduced in 2022 surpassed the amount discontinued.
The fiscal cost of support measures for fossil fuels in Belgium was estimated at EUR 7.27 billion in 2022 (Table 1). Ninety-nine per cent (99%) was directed at end user beneficiaries, as opposed to 0% directed to firms. Support was mainly given out in the form of tax expenditures (EUR 6.86 billion) accounting for 94% of the total fiscal cost of support measures. Direct transfers amounted to EUR 0.41 billion.
The fiscal cost of support measures for fossil fuels has increased by 177% since 2017. Since last year, tax expenditures have increased by 116%, from EUR 3.07 billion to EUR 6.86 billion and direct transfers increased by 108%, from EUR 0.23 billion to EUR 0.41 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 |
2.467 |
2.715 |
2.994 |
3.272 |
3.074 |
6.865 |
|
Direct transfers |
0.154 |
0.123 |
0.175 |
0.162 |
0.218 |
0.492 |
|
Total |
2.621 |
2.838 |
3.170 |
3.434 |
3.292 |
7.357 |
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 millions of national currency)
|
Measures associated with large fiscal cost in 2022 |
2022 |
2017 |
Variation since 2017 |
|
|---|---|---|---|---|
|
Tax expenditures |
|
|||
|
VAT reduction for electricity and gas |
2073.861 |
Started in 2022 |
2073.861 |
|
|
Fuel Tax Reductions for Certain Professional and Residential Users |
1961.031 |
2110.316 |
-149.286 |
|
|
Extension of the social energy tariff for households |
845.253 |
Started in 2021 |
845.253 |
|
|
Direct transfers |
||||
|
One-off cheques to households that consume heating oil, gas, electricity or pellets |
185.000 |
Started in 2022 |
185.000 |
|
|
One-off lump-sum transfer of EUR 100 to all households |
134.000 |
Started in 2021 |
134.000 |
|
|
Social Tariffs for Natural Gas and Electricity |
120.108 |
100.025 |
20.082 |
|
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
|
VAT reduction for electricity and gas |
VAT reduction for electricity and gas from 21% to 6% since March 2022. In 2023, this measure is permanent for residential contracts but it is compensated by a rise in excise rates. |
|
Fuel Tax Reductions for Certain Professional and Residential Users |
This measure encompasses a number of provisions that reduce the rates of excise tax applicable to purchases of petroleum products and natural gas by certain professional and residential users in Belgium. Until 1 January 2015, eligible professional users included companies for which energy purchases represent at least 3% of the value of their gross output (or for which total energy-tax liabilities represent at least 0.5% of their value added) and those that possess an Environmental Permit (Permis Environnemental or Vergunning Milieudoelstelling). Households are the most significant group of beneficiaries, however. This is due in large part to the lower taxation of fuel oil used for heating purposes, where the Belgian Government considers the rates applicable to on-road diesel fuel to be the adequate benchmark against which to calculate the resulting tax expenditure. This results in comparatively large annual amounts of estimated revenue foregone. The tax reductions reported under this measure apply mainly to diesel fuel, though budget documents also provide estimates for LPG and kerosene starting in 2004. No estimates are, however, available for fuel oil and natural gas. Data are not available prior to 1997. Data as of 2004 include commercial and industrial use except LPG where only heating purposes are concerned. |
|
Extension of the social energy tariff for households |
Extension of the social energy tariff doubling the number of households covered. |
|
One-off cheques to households that consume heating oil, gaz, eletricity or pellets |
One-off cheques to households that consume heating oil, natural gas, electricity, or pellets. |
|
One-off lump-sum transfer of EUR 100 to all households |
Granting of a heating bonus of EUR 100 net to all holders of an electricity contract for their home (deducted from electricity bill) |
|
Social Tariffs for Natural Gas and Electricity |
Certain households in Belgium are entitled to reduced tariffs for their consumption of natural gas. These social tariffs were introduced in 2004 and are set once every six months by the energy regulator (the Commission de Régulation de l'Électricité et du Gaz – CREG) on the basis of the lowest commercial tariffs in the country. Beneficiaries of the social tariffs are also exempt from the excise tax normally levied on sales of natural gas. Payments are made to energy suppliers out of a fund partly financed through the federal budget in order to compensate them for the difference between the reduced tariffs and the market price. Eligible households include those receiving assistance, disabled persons, and the elderly. In order to mitigate the consequences of the COVID-19 crisis, the federal government has decided to temporarily grant the social tariff to those entitled to the increased intervention. The extension is temporary, for both gas and electricity, and applies between 1 February 2021 and 31 December 2022. In addition, the government has decided to grant in 2021, a single amount of EUR 80 for the beneficiaries of this reduced rate. |
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.