The Netherlands's Effort to Phase Out and Rationalise its Fossil-Fuel Subsidies | OECD |

This report is the principal outcome of this peer review process, reflecting the IEA and OECD review team's in-person discussions with officials from the Netherlands, but also deliberations among the review team and consultations with stakeholders. After summarising the key aspects of the Netherland's energy landscape, the report analyses in detail the subsidies and other measures that the Netherlands and the review team have identified in the course of the review process.

As part of its budgetary planning process, the government of the Netherlands conducts periodic policy evaluations of its tax expenditures and subsidy programmes. This review complements the government's efforts to cast light on the state of fossil-fuel subsidies and their relevance for the broader energy, climate and fiscal policies in the country. In support of this review the government of the Netherlands produced a self-report (NSR) identifying 13 individual fossil-fuel subsidy measures in the form of tax exemptions or reductions, benefitting both the production and consumption of fossil fuels. Together, they amount to at least EUR 4.48 billion of revenue forgone for the government.

While no subsidies were put forth for reform in the NSR, the government views this review process as part of its commitment to better align its policies with its climate and energy-transition objectives and to "green" its tax system. This report will be used to inform the government's response to questions from Parliament concerning fossil-fuel subsidies and the potential need for reforms.

In this peer review, the Netherlands chose to maintain a broad definition of fossil-fuel subsidies that extends beyond a narrow definition of "subsidies" whereby government budgetary transfers are used to directly affect prices. The scope of the review accounts for both direct budgetary transfer and tax measures that result in government revenue forgone. Tax-related measures are the main mechanism through which the government of the Netherlands delivers support to fossil fuels. Several exemptions and reductions are granted to energy-intensive industries and other energy-consumer groups. Although the burden sharing between households and companies has changed recently, energy taxes in the Netherlands are still very degressive, translating into a heavier tax burden on households and other small-scale energy consumers.The review team notes that the inclusion of the degressive energy tax structure in the NSR is an important step towards assessing the efficiency of this policy design and identifying avenues for reform.

The review team notes also the centrality of the EU Energy Tax Directive (ETD) - a framework legislation that harmonises energy taxes in the EU to ensure the well-functioning of the Single Market - in deciding the scope of fossil-fuel subsides in the Netherlands.