CO2 emissions from households more heavily taxed than from businesses

The effective carbon tax rate (ECR) reflects the tax per tonne of CO₂ emitted. The ECR focuses on CO₂ emissions and taxes directly related to the burning of fossil fuels. Greenhouse gas emissions have an impact on global warming, which is why climate policies in the Netherlands and elsewhere aim to reduce those emissions. Taxing or pricing greenhouse gas emissions can contribute to this objective. CO₂ is the primary greenhouse gas, emitted in part by the burning of fossil fuels.

The government taxes fossil fuel users for their CO₂ emissions in several ways. In the Netherlands, CO₂ emissions are taxed through excise duty on motor fuels, the energy tax on natural gas and costs for emission allowances. The latter are charged to businesses through the European Emissions Trading Scheme (EU ETS). For households, non-deductible VAT on excise duty and energy taxes are also included. However, there are also instruments that reduce the carbon tax rate. Free allocated ETS allowances are offset against the ETS tax as subsidies. The (temporary) price cap on natural gas in 2023 has been offset against the energy tax as a subsidy.

In the period 2015-2021, the tax on emissions of one kiloton of CO₂ (the ECR) for the Netherlands increased from 84 to 123 euros (converted to 2023 prices). The main cause of the increase is the higher energy tax on natural gas. In 2021 and 2022, the ECR decreased again to 88 euros per tonne CO₂. A reduction in the excise duty on fuel in 2022 contributed to a lower ECR in that year. In 2023, the energy price cap resulted, on balance, in lower taxes on the use of natural gas. Without this ceiling, the ECR - assuming unchanged consumption - would have been 107 euros for 2023. Since 2021, a higher contribution of the cost of allowances is seen in the effective carbon tax rate due to increased ETS market prices.

In relative terms, households pay the most for their CO₂ emissions

Among the groups of largest emitters, households had the highest ECR at 219 euros per tonne of CO₂ emissions in 2023. This includes the temporary subsidy on gas prices in 2023 due to the introduction of the energy price cap. However, the ECR of households adjusted for inflation was lower than in 2015.

Of the major emitters, only households and road transport have ECRs that are higher than the Dutch average. On the other hand, CO₂ emissions from international water and air transport are virtually untaxed. Energy-intensive industry businesses are hardly taxed for their CO₂ emissions, if at all. This is due to tax rebates or exemptions from the energy tax and free allocation of ETS emission allowances. As a result, the base metal industry shows a negative ECR on balance.

From 2015 to 2023, CO₂ emissions excluding biomass combustion decreased from 186 billion to 138 billion kilograms. The most notable decrease is in the energy supply industry, where CO₂ emissions more than halved. At the same time, the ECR in this industry increased from 12 euros in 2015 to nearly 76 euros per tonne of CO₂ emissions in 2023. This is because energy companies have no longer received any free ETS allowances since 2013. As a result, and because of rising ETS prices, energy companies have been paying more and more for their carbon emissions.