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NATIONAL DEBATE ON CARBON PRICING

In order to determine the modalities for implementing a carbon price in Belgium in the sectors that are not covered by the European Union Emission Trading System (EU ETS), i.e. mainly buildings and transport, the Federal Climate Change Service launched a national debate in 2017. This debate involved all the relevant experts and stakeholders, from the entrepreneurial, administrative, academic, associative and trade union sectors.

At COP21 in Paris in 2015, the international community committed to 'holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels'. To reach this goal, we will need to reduce our emissions by at least 80 to 95% in 2050 with respect to 1990, implying a deep change in our societies.

Recent analysis indicates that, even though it is a major challenge, such a reduction objective is technically possible and can even be reached via several different trajectories. The analysis of the macroeconomic impacts of those different trajectories also shows that investments required for the low carbon transition may stimulate growth and employment through energy efficiency gains, among other things. Drastically reducing our greenhouse gas emissions would also generate important benefits in other associated areas, in particular in terms of air quality, mobility or energy independence.

To align investments with our emission reduction objectives, i.e. towards energy efficiency and renewable energy sources, public authorities have a wide range of instruments at their disposal, that have to be used at every policy level.  Carbon pricing is one of those instruments which allows to explicitly integrate the social cost linked with carbon dioxide emissions in the decision-making of the different actors, by including the social cost in the prices that these actors are confronted with. There are two ways of implementing such a pricing scheme:

  • an emission trading system sets a cap on the total amount of greenhouse gases that can be emitted over a given period. Within the cap, actors receive or buy emission allowances or 'quotas' which they can they can exchange on a primary and secondary market to cover their own emissions, generating a trading price per carbon unit (it is the instrument that covers, at European level, the producers of electrical power and the largest companies);
  • a carbon tax directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or on the carbon content of fossil fuels/goods.

A policy increasingly implemented all over the world

Over the past two years, an important move towards carbon pricing has been noticed all over the world. This movement is spurred both by the private and the public sector and has notably led to the creation of the Carbon Pricing Leadership Coalition, a group of more than 74 countries and 1000 businesses that support carbon pricing.

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Figure 1: Overview of carbon pricing initiatives in the world (Source: CPLC, 2016)

 

Today, over 46 countries and 26 cities, States and Regions, (including 7 out of the 10 largest economies) have already put a price on carbon, while 90 others are considering using such a mechanism to reach their target under the Paris Agreement (see figure 1).

For example, in 2014 France decided to include in its taxes on fossil fuels a 'carbon component' linked to their CO2 emissions. In doing so, France was following suit with Ireland, that is applying, since 2010, a similar tax on all the fossil fuels used in the transport, agricultural and building sectors. Similar schemes have also been implemented in developing countries such as Chile or South Africa.

 

What about Belgium?

Putting a price on our carbon emissions is an efficient tool for reducing our greenhouse gas emissions and a potential source of social and economic opportunities. In Belgium, already 37% of our emissions are covered by a carbon pricing mechanism: the European Union Emissions Trading System. This system covers 308 companies in our country and over 80% of the greenhouse gases emitted by the Belgian industrial sector. The remaining emissions, originating mainly from the transport and buildings sectors, are currently not covered by an explicit carbon price.

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Putting a price on all our carbon emissions is an important step to redirect investments and to facilitate our country's transition to a low carbon and resilient economy. Given that parts of our emissions are already falling under the European Union Emission Trading System, the national debate that took place in 2017 and early 2018 aimed at analysing and discussing the different ways of pricing carbon emissions emitted outside of the EU ETS, originating mainly from the transport and buildings sectors.

Carefully setting out the implementation modalities of such an instrument is essential to grasp the social and economic opportunities linked with the low carbon transition while avoiding or correcting the adverse effects that could affect specific sectors or population groups. A thorough consultation of the Belgian stakeholders was therefore imperative. 

This national debate took place in several steps (see figure 2) and consisted of high level moments with a large number of participants (displayed in orange, aiming at generating the necessary political impulse for the initiative), but also of sectoral technical workshops with a limited number of participants (displayed in blue, aiming at discussing technical issues in the presence of experts and stakeholders).

Structure of the national debate on carbon pricing

Figure 2: Structure of the national debate on carbon pricing

 

The technical workshops of this initiative were based on existing studies, analyses and recommendations, brought together and put in perspective in an objective way by a consortium of consultants including Climact, PwC Belgium and SuMa Consulting, with the assistance of the experts from the Federal Climate Change Service.

This important compilation and synthesis work involved experts from the different policy levels in Belgium and benefited from the expertise of a steering committee composed of representatives from the federal and regional administration, as well as from Belgian advice committees. All of them accepted to provide their guidance to the initiative, to feed the discussions that took place during the technical workshops and to help identifying relevant studies and experts who participated in this national debate.

 

The results of these discussions were presented on 29 June 2018 during a high-level wrap-up event. This event ended with a debate on how to implement in the best possible manner such a carbon pricing mechanism, during which the different Belgian stakeholders had the opportunity to explain their vision on the various options identified during the technical phase.  

 

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Carbon pricing infographic - LR.PNG


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Final report [EN]

 Executive summary
EN | FR | NL

 Graphic design

 Public consultation
FR | NL
on the public perception 

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This debate identified a series of clear options for the implementation of a carbon price in the sectors that are not part of the European Union Emission Trading System (the so-called 'non-ETS sectors'). It is an important measure to put our country on the right track toward a climate neutral society.

Carbon pricing is a policy which allows to integrate the climate effects of the greenhouse gas emissions originating mainly from our consumption of fossil fuels. Such a scheme is already enforced in Europe in the energy and industry sectors through the EU ETS. 

Pricing carbon in the sectors analysed in the context of this debate has already been implemented in 46 countries around the world. Such a system aims at giving a price signal to consumers, in order to encourage them to reduce their greenhouse gas emissions. It also allows to collect revenues that can afterwards be redistributed to, for example, employment or energy transition measures (and so guaranteeing budget neutrality).

However, such a measure is not a magic wand: to be efficient, it must be aligned with other policies in the sectors involved (related, for instance, to the renovation of our buildings or to our modes of transportation). Efficient coordination between the several Belgian government levels is therefore essential when implementing such a policy.

Based on experiences abroad and on analyses performed during this debate, 3 price trajectories have been suggested. Starting from 10 € per tCO2 in 2020, the suggested carbon price would progressively rise to 40, 70 or 100 € per ton in 2030.

In the buildings sector(31% of non-ETS emissions), the medium price trajectory (70 €/ton in 2030) would lead to an average annual contribution of 32 € per household in 2020, and of 127 € in 2030. Along with other policies and measures, it would reduce the average energy consumption in Belgium (and the final energy bill) by -10% in this sector in 2030 and by -47% in 2050.

In the transport sector (35% of non-ETS emissions), the same medium trajectory would lead to an average annual contribution of 31 € per diesel or petrol car in 2020, and of 154 € in 2030. Similarly, along with other policies and measures, it would reduce the average energy consumption of those vehicles (and thus their final energy cost) by -22% in 2030. In this sector, implementation options have been considered to take into account the risk of loss of competitiveness by the road transport companies.

The suggested carbon price would allow to collect substantial public revenues for at least 3 decennia. Its medium trajectory would generate up to 2.6 billion € additional fiscal revenues on an annual basis in 2030. The way to allocate those revenues is a crucial element to ensure that the potentially adverse impacts of the measure are compensated, and hence to increase its acceptance by the Belgian actors.

In this regard, several options have been identified:

  • Part of the revenues collected in all sectors could be used in the context of a 'tax shift', in order to reduce labour and/or electricity costs.
  • In the buildings sector, it will be necessary to devise compensation measures (for instance through energy vouchers or specific policies), in order to address the potentially regressive impact of the mechanism, as the most vulnerable actors of our society spend a larger share of their income to pay for their energy bill.
  • As for the revenues collected from the transport sector, they could be redistributed through policies fostering active modes of transportation, public transport and electric mobility, as well as through investments in infrastructure and innovation for freight transport (a special attention should be paid to SMEs).

In parallel with this debate, the Federal Climate Change Service commissioned a public survey of the Belgian population's perception of a carbon price. This study revealed, among others things, that there is a potentially high support of the Belgian population for such a mechanism, and that a majority of the population agrees with the redistribution options identified in the context of this debate and with the necessary policy alignment that should take place in parallel with the introduction of a carbon price.

 

Presentations 

WELCOME

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Welcome : pdf / vidéo 

H.E. Marie Christine Marghem

Belgian Federal Minister for Energy, Environment and Sustainable Development

HIGH-LEVEL SESSION ON CARBON PRICING AND LOW-CARBON TRANSITION 

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Carbon pricing for cleaner air and a safer climate : pdf / vidéo

H.E. Marcelo Mena

World Bank Group, former Chilean Minister of Environment

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Mr. Thomas Leysen : vidéo

BE entrepreneur, Chairman of KBC, Umicore and Mediahuis 

un résumé est disponible sur Le Soir et De Standaard 

MAIN RESULTS OF THE NATIONAL DEBATE ON CARBON PRICING

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Carbon pricing debate - main results : pdf / vidéo

Peter Wittoeck

Head of the Federal Climate Change Service

 

 

 &

Pascal Vermeulen

Managing Director of Climact  

 PANEL DEBATE ON CARBON PRICING 

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vidéo

 

Short videos of Belgian academicians and opinion makers

(in alphabetical order)

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Ronny Belmans - Director of EnergyVille

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Thierry Bréchet - Professeur d’économie de l’environnement - UCLouvain

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Hans Bruyninckx - Executive director - European Environment Agency

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Jos Delbeke - Senior Advisor European Policy Strategy Centre - European Commission

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Paul De Grauwe - Professor of Economics  - London School of Economics

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Eric de Keuleneer - Professeur d'économie - ULB (Solvay)

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Johan Eyckmans - Professeur d'économie de l'environnement - KULeuven

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Jean-Pascal van Ypersele de Strihou - Professeur de climatologie - UCLouvain 

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Frank Venmans - Professeur d'économie - UMons 

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Opening remarks

H.E. Marie Christine Marghem

Belgian Federal Minister for Energy, Environment and Sustainable Development

 

DECARBONIZING OUR ECONOMY: CONTEXT & CHALLENGES

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Decarbonizing the EU energy system: the Energy Union initiative

Maroš Šefčovič

Vice-president of the EU Commission

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Pricing Carbon: Effective carbon rates and beyond 

Simon Upton

Director, OECD Environment Directorate



THE IMPORTANCE OF PRICING CARBON

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Carbon pricing in buildings and transport - Paradoxes and possibilities

Michael Grubb

University College London

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Carbon pricing and the Belgian low-carbon transition 

Peter Wittoeck

Head of the Belgian Federal Climate Change Service

 

LESSONS LEARNED ABROAD

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The French "Carbon Component" in national energy taxes

Gilles Croquette

Head of Unit Emissions, Projections and Modelling
Ministry for Environment, Energy and the Sea

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Carbon Pricing - Swedish Experiences and Challenges Ahead

Ulrika Raab

Senior Advisor for Climate Change Policy
Swedish Energy Agency

 

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Carbon Tax - The Irish case

Charles Van Tuyckom

Senior Consultant (PwC)
on behalf of Green Budget Europe

 

 

Workshop 1. Transversal issues

 

Workshop 2. Buildings sector

 

Workshop 3. Transport sector

 

Workshop 4. Other sectors (non-ETS industry, agriculture and waste, fluorinated gases)

More information: