Fuel excise reform in Belgium - Long term effects on the environment, traffic and public finance [ Working Paper 09-15 - 08/12/2015]

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This paper seeks to analyze the long term effects on traffic, environmental quality and public finance of the planned reform of fuel excise duties in Belgium. In the framework of a large scale tax reform, the Belgian federal government will implement an equalization of diesel and petrol excise rates over the 2016-2018 period.

If implemented fully, the fuel excise reform by 2030 diminishes CO₂ emissions by the transport sector by 0.5%, emissions of Particulate Matter by 0.6% and of NOx by 2.6%. This yields society an environmental benefit value at 4.2 cents per euro of tax revenue raised, of which 2.7 cents are from lower local air pollution. The diesel reform will diminish time costs borne by users of transport by 32 cents per euro of tax revenue.

Sensitivity analysis shows that if the new standards in NOx emissions based on real driving tests are strictly imposed by 2020, the long-term gain in environmental welfare from the excise reform drops to 3.4 cents per euro of revenue raised. This suggests raising excise duties on diesel fuel would be necessary to correct for elevated NOx emissions for years to come, if no action is taken to comply with European standards.