Banque nationale de Belgique : Fiscal policy instruments to mitigate climate change – A Belgian perspective

Limiting global warming to 2°C and preferably to 1,5°C, above pre-industrial levels, requires a significant drop in global GHG emissions. As current climate mitigation policies are insufficient, additional government measures are necessary to reach these targets. Market-based or fiscal policy instruments are a crucial element in a governments toolbox. By increasing the relative price of pollution, they provide polluters with market incentives to reduce pollution and.as such, promote energy efficient technologies, provided that GHG emissions are priced adequately.

This article discusses fiscal policy instruments that Belgium has put in place to reduce greenhouse gas emissions with particular attention to taxes and subsidies that affect the private cost of emitting C0₂ and evaluates how cost-efficient they are and what their impact is on redistribution.