Increasing fossil fuel subsidies by 6 million euros and proud of it…

A remarkable tweet that I stumbled upon (translated from Dutch):

You often hear on the right that Belgium has the highest tax level. What is not told is where the money is going.

Belgium, king of the fossil fuel subsidy …

Tweet Tobias Daneels 2020-08-20: fuel subsidy

The tweet was written by a “Liaison officer & communications EU” and politician affiliated with the Flemish green party. Relating to the content of the tweet, it is certainly true that Belgium has one of the highest tax levels of the EU countries (only surpassed by France and Austria), but whether this is due to “fossil fuel subsidies” is questionable at best. There are many other reasons to be found why we have such a high tax level other than “fossil fuel subsidies”, even being king of fossil fuel subsidies.

What is not told is what those subsidies consist of exactly. Before I looked into the issue, I assumed that these subsidies were similar to the renewables subsidies. Looking deeper into those subsidies, I found that this is not the case. It is no difference here. The twitterer linked to another tweet that has a link to the article Europe’s love affair with fossil fuels and this in turn has a link to the Data sources for Subsidies Investigation, detailing those “fossil fuel subsidies” of EU countries. This is what I extracted from this table for Belgium:

Category Amount (Million Euros) Details
Tax breaks for energy intensive industry 564.00 Lower excise tax for heating oil (professional)
Tax breaks for combustion engine vehicles 3,700.00 Favorable tax treatment for company cars. Belgium heavily subsidizes company cars. The tax benefit for employees and employers to include a company car in the salary package is much bigger than giving a pay rise. This promotes car ownership and car use, and thus also fossil fuel consumption. The estimates of how much this subsidy accounts to differ. The European Commission said the Belgian state misses out on 3,7 billion euro’s in tax revenue per year through these company care schemes.
Tax breaks for aviation 210.00 Tax exemption kerosene aviation
Subsidies to domestic fossil fuel use 1,234.00
  • Lower excise tax for heating oil (residential)
  • Social tariffs gas and electricity
Petrol/Diesel tax breaks/refunds 359.00
  • Tax rebate fuel for taxi and freight
  • Tax break diesel for commercial and industrial use
EU Emissions Trading System 796.51 Freely allocated allowances (All stationary installations)

There are all tax breaks, tax exemptions or ETS licenses given away for free. No money is exchanged from our government to the fossil fuel industry. These are indirect subsidies, potential income foregone by the government. The objective of these subsidies is not to support the fossil fuel industry, the label doesn’t describe the purpose of these indirect subsidies.

Some examples. The intention of the tax breaks for energy intensive industry is to keep the energy intensive industry in Belgium, so they can keep contributing to the economy. The intention for the “Petrol/Diesel tax breaks/refunds” is for example cheaper diesel for for example farmers, so they can produce cheaper food for the consumers. The intention of the “subsidies to domestic fossil fuel use” is to prevent energy poverty (which might even be partly due to green measures…)..

Those measures will benefit the fossil fuel industry indirectly (more fossil fuel products may be sold than when these tax breaks were in not place), but that is not their objective. It is an unintended consequence and in that sense not comparable with subsidies for renewables.

I doubt that this foregone income will become available for governments when the tax breaks are lifted. If the energy intensive industry would pay the complete tax and nevertheless stayed in Belgium, then yes, government will now have a real income generated by those taxes. But if this industry leaves the country, then the government will have no income anymore from those taxes and it will have an impact on the economy, for example as an extra costs for the government (more unemployment).
Farmers will probably not use much less fuels when they have to pay more tax on it, but then their costs will increase and their products will become more expensive, maybe even to the extent that imported products become more appealing.
If social tariffs would disappear or get higher, then more people will get into energy poverty. This will not only have an impact on the fossil fuel use, but it will also have an impact on the the green party itself. Being the socialist party 2.0, those people are one of their target audiences, so the Green Party is very unlikely to cut into this type of fossil fuel subsidies.

On the contrary, just look at this tweet from the Flemish Green party detailing a proposal of one of its politicians (Tinne Van der Straeten) at the end of 2019 (translated from Dutch):

Breaking news from the Energy Committee: at the initiative of @TinneVdS 120,000 people in energy poverty are being helped. Social fund for gas and electricity is indexed for the first time in years with 6 million euros (12.5%) to 59 million. Cross-party support.

Tweet Groen 2020-08-20: fuel subsidy

Apparently, one of the politicians of the Flemish Green party proposed to raise the social fund for gas and electricity in order to help 120,000 people in energy poverty. That is without any doubt a laudable initiative, but don’t they classify measures that indirectly benefit the fossil fuel industry as a, ahem, fossil fuel subsidy?

Do I understand it correctly that their proposal increased fossil fuel subsidies by 6 million euros? Okay, that is a tiny amount compared to the total of those subsidies, but it is an increase nevertheless. Something one would not expect from those who oppose such subsidies in the first place and they even pat themselves on the back for it…

It is the ambiguity of the term “fossil fuel subsidy” that makes that members of the Green Party can use it depending what supports their case. In general, measures that somehow benefit fossil fuel use are assumed fossil fuel subsidies, regardless of their goal, and they strongly oppose them. Yet when such a measure impacts their voter base, then it isn’t called a subsidy anymore, let alone a fossil fuel subsidy, and they are happy to take the initiative to increase those pesky fossil fuel subsidies.

2 thoughts on “Increasing fossil fuel subsidies by 6 million euros and proud of it…

  1. vuurklip

    As usual, the devil is in the detail. Thanks for digging this up!

    Each and every subsidy is evil. In the end, it is the individual who pays the subsidy. This does not hurt those who are well-to-do but mostly the poorer amongst us. And it is mostly those already well-to-do who benefit directly from subsidies. So in effect imposing a subsidy pays the rich by robbing from the poor.

    E.g. a subsidy to buy an electric car: I cannot afford an EV even with a subsidy, but my tax is used to pay a wealthier person to by an EV.

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  2. Chris Morris

    The other hidden “fossil fuel subsidy” claimed by Green parties and the like is the damage from climate change. In many cases, it dwarfs other sums. They also never explain how the cost is calculated, leading the sceptical observer to think it is just a made up number.

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