Recent Fossil Fuel Subsidy Reforms
Reforms to phase out fossil fuel subsidies by COFFIS members.
Belgium
Reform period: Gradual reduction between 2025 and 2027; complete phase-out by 2028
Summary: Before the reform, businesses were able to deduct expenses relating to the use of vehicles from 40% to 100% according to their CO2 emissions. From 2026, all new vehicles will have to be driven without any carbon emissions so that the business expenses resulting from their use remain tax deductible (100% in 2026). The current tax deduction granted to combustion and hybrid vehicles that are already in use or purchased, leased, or rented before July 1, 2023, will remain. For vehicles purchased, leased, or rented between July 1, 2023, and December 31, 2025, the deduction is gradually phased out until these expenses will no longer be deductible from 2028. The reform of 2025 would extend the tax deductibility of hybrid vehicles purchased, leased, or rented before the end of 2027 by self-employed individuals subject to the personal income until the end of 2029.
Amount:
- 2023: EUR 3.4 billion;
- 2018–2023 average: EUR 3.08 billion
Source: Loi du 25 novembre 2021 organisant le verdissement fiscal et social de la mobilité Art. 22 Chapter 1
Reform period: Reduction of reimbursement between 2023 and 2026 (in total, by 23%)
Summary: Since 2003, a ratchet system provides that in the event of a decrease in fuel prices, half of the effect of the reduction is offset by an adjustment of excise duties. Since 2004, road diesel used by ‘professional users’ (mainly for heavy-goods vehicles over 7.5 tonnes and for taxi) is exempt from this ratchet system and therefore receive a partial reimbursement of the excise duties on road diesel. The recoverable amount between 2018 and 2021 was EUR 247.61 per 1,000 liters. The government decided to reduce this to EUR 226.97 for 2022, and to EUR 205.06 for 2023. However, due to energy prices hike caused by the war in Ukraine (and temporarily reduced excise duties) the reimbursed amount was significantly lower in 2022 and at the beginning of 2023 as the net excise duty rate paid could not be lower than then the rate on January 1, 2022. From April 2023, with the re-establishment of the previous excise tax levels, the recoverable part returned to the original plan of EUR 205.07 and will be further reduced in the following years (EUR 193.50 from 2024, EUR 192.40 from 2025; EUR 191.30 from 2026).
Amount:
- 2023: EUR 660.8 million;
- 2018–2023 average: EUR 856.12 million
Sources: Loi du 25 novembre 2021 organisant le verdissement fiscal et social de la mobilité Art. 22 Chapter 4
Reform period: Phased out in July 2025
Summary: Coal and certain coal-based fuels have benefited from a reduced VAT rate of 12%, covering products such as lignite, compressed lignite, coal, lignite coke, and uncalcined petroleum coke used as fuel. This preferential rate (previously 6% before being increased in line with EU requirements) is abolished under the 2025 reform. From July 29, 2025, the standard 21% VAT rate applies to all relevant domestic sales, intra-Community acquisitions, and imports.
Amount:
- 2022: EUR 5.1 million;
- 2018–2022 average: EUR 3.28 million
Denmark
Reform period: Phased out in 2025
Summary: Domestic aviation fuel in Denmark had been fully exempt from both energy and CO₂ taxes since the introduction of these taxes. The 2022 Green Tax Reform introduced a new CO₂ tax rate—covering both existing CO₂ and energy taxes—of DKK 750 per tonne of CO₂ by 2030 for companies not covered by the EU Emissions Trading System (ETS) and DKK 375 per tonne for ETS-covered companies (2022 prices), phased in gradually from 2025. This reform brought domestic aviation within the scope of the national CO₂ tax framework, effectively abolishing the exemption. As domestic aviation is covered by the EU ETS, the applicable Danish CO₂ tax will be DKK 375 per tonne in addition to the ETS allowance price.
Amount:
- 2024: DKK 180 million (~EUR 24 million), (Government of Denmark)
Source: Green Tax Reform Agreement 2022, p.4
Reform period: Phased out in 2025
Summary: Fuels used for railway transport in Demark have been fully exempted from both energy and CO₂ taxes since the introduction of these taxes. The exemption applied mainly to diesel used in non-electrified railway operations. The 2022 Green Tax Reform introduced a new CO₂ tax rate—covering both existing CO₂ and energy taxes—of DKK 750 per tonne of CO₂ by 2030 for companies not covered by the EU ETS and DKK 375 per tonne for ETS-covered companies (2022 prices), phased in gradually from 2025. This reform brought railway operators within the scope of the national CO₂ tax framework, effectively abolishing the exemption.
Amount:
2024: DKK 240 million (~EUR 32 million), (Government of Denmark)
Source: Green Tax Reform Agreement 2022, p.4
Reform period: Abolished in 2025
Summary: Agriculture, horticulture, and certain other energy-intensive activities in Denmark benefited from reduced or zero rates of energy tax on fossil fuels used for heating, machinery, and production processes. Similar preferential rates also applied to some small industrial users not covered by the EU ETS. The 2022 Green Tax Reform introduced a new CO₂ tax rate—covering both existing CO₂ and energy taxes—of DKK 750 per tonne of CO₂ by 2030 for companies not covered by the EU ETS and DKK 375 per tonne for ETS-covered companies (2022 prices), phased in gradually from 2025. This reform abolished all such reductions and exemptions, bringing these activities within the national CO₂ tax framework.
Amount:
- 2024: DKK 840 million (~EUR 113 million), (Government of Denmark)
Source: Green Tax Reform Agreement 2022, p.4
Reform period: Phased out in 2025 for domestic shipping and from 2029 for the fisheries sector
Summary: Fuels used in domestic shipping, including by ferries and fishing vessels, have been fully exempt from both energy and CO₂ taxes since the introduction of these taxes in the early 1990s. The 2022 Green Tax Reform introduced a new CO₂ tax rate—covering both existing CO₂ and energy taxes—of DKK 750 per tonne of CO₂ by 2030 for companies not covered by the EU ETS and DKK 375 per tonne for ETS-covered companies (2022 prices), phased in gradually from 2025. This reform brought domestic shipping within the scope of the national CO₂ tax framework, effectively abolishing the exemption. A subsequent political agreement in 2025 postponed the application of the tax to the fisheries sector until 2029; however, the tax level for 2030 (DKK 750) has been kept.
Amount:
2024: DKK 1.28 billion (~EUR 172 million), (Government of Denmark)
Source: Green Tax Reform Agreement 2022, p.4; Agreement: A new course for Danish fisheries, p. 8
Reform period: Phased out in 2025
Summary: Energy-intensive companies outside the EU ETS, such as food processing facilities, greenhouses, and small industrial plants, benefited from a base allowance (“bundfradrag”) under Denmark’s CO₂ tax system. This allowance reduced their CO₂ tax liability by exempting a portion of emissions from taxation, effectively lowering their average carbon cost compared to other non-ETS sectors. The 2022 Green Tax Reform abolished this allowance.
Amount:
2024: DKK 60 million (~EUR 8 million), (Government of Denmark)
Source: Green Tax Reform Agreement 2022, p. 7
The Netherlands
Reform period: Gradual phase-out between 2025 and 2035
Summary: Greenhouse horticulture companies can claim reduced rates for the use of natural gas up to 1 million m³—if the natural gas is used for heating—to promote the growth of horticultural products. The Fiscal Climate Measures (Greenhouse Horticulture) Act in the 2024 Tax Plan stipulates that the reduced rate will be entirely phased out between 2026 and 2035.
Amount:
- 2025: EUR 114 million;
- 2023–2025 average: EUR 143 million
Source: Greenhouse Horticulture Tax Climate Measures Act, Article I D, Article II – Article VIE
Reform period: Gradual reduction between 2025 and 2030
Summary: Natural gas used in installations for generating electricity was exempt from energy tax, on the condition that the efficiency of conversion to electricity of the installation is greater than 30%, to avoid double taxation. Natural gas consumption for conversion into heat output was therefore also not taxed, even though it is not taxed further along the chain. The 2024 Tax Plan stipulates, in the Fiscal Climate Measures (Greenhouse Horticulture) Act, that the amount of the input exemption depends on the electricity generated by the installation, thus removing the benefit for gas used for heat generation or other processes.
Amount:
- 2025: EUR 876 million;
- 2023–2025 average: EUR 715 million
Source: Greenhouse Horticulture Tax Climate Measures Act, Article I D, Article II – Article VI
Reform period: Phase-out in 2027
Summary: Dual and non-energy uses of coal are exempt from the coal tax under a provision of the EU Energy Tax Directive. The vast majority of exempted coal use falls within the coke, iron, and steel industries. The 2025 Tax Plan stipulated that this exemption will be abolished as of January 1, 2027.
Amount:
- 2025: EUR 79 million;
- 2023–2025 average: EUR 76 million
Source: Amendment of some tax laws and some other laws (Tax Plan 2025), 5.31 (pp. 136–139); Environmental Taxes Act, Article 44
Reform period: Phase-out in 2030
Summary: The use of coal for electricity generation is exempt from taxes to prevent levies on both the coal and the electricity. The prevention of double taxation follows from the EU Energy Tax Directive, but the exemption is not mandatory under the directive. The phasing out of coal use for electricity generation by 2030 is guaranteed by the Coal Prohibition Act for Electricity Production, effectively removing this exemption.
Amount:
- 2025: EUR 37 million;
- 2023–2025 average: EUR 53 million
Source: Prohibition of Coal in Electricity Production Act, Article 2 and Article 3b
Reform period: Phase-out in 2028
Summary: The ETS obliges European electricity producers to purchase emission allowances for their CO2 emissions. These producers pass costs on to wholesale electricity prices, increasing electricity costs for companies within the EU. This creates a risk of relocating production from electricity-intensive companies within the EU to outside the bloc, resulting in carbon leakage. The IKC-ETS scheme reduces this risk by offsetting the indirect ETS costs companies incur in their production. The scheme is available to companies in specific business sectors and was extended in 2025 by 3 years through to 2027.
Amount:
- 2025: EUR 167.4 million;
- 2023–2025 average: EUR 117.8 million
Source: Announcement by Ministry of Climate and Green Growth (July 3, 2025)
Reform period: Gradual phase-out until 2040
Summary: Within the EU ETS, companies that emit CO₂ directly must be in possession of emission allowances. Certain industrial sectors are allocated free emission allowances, based on the emissions of the 10% of companies with the lowest CO₂ emissions per product. There are three categories of sectors that receive free allowances. For sectors in which no significant risk of carbon leakage has been identified, the number of free emission allowances will be reduced to zero in 2030. For sectors where a significant risk of carbon leakage has been determined but for which the recently established Carbon Border Adjustment Mechanism (CBAM) offers alternative protection against carbon leakage, the number of free emission allowances will be reduced to zero by 2034. For the remaining sectors (significant risk of carbon leakage and no protection via CBAM), a decreasing number of free emission allowances will continue to be issued through to 2040.
Amount:
- 2025: EUR 2.86 billion;
- 2023–2025 average: EUR 3.04 billion
Source: EU Directive 2023/959, Article 10a(1a); Regulation (EU) 2023/958, Article 3d (1)
Switzerland
Reform period: Phased out in 2026 for local transport; phase out in 2030 for non-local transport (when no waiver is granted)
Summary: Since 2016, transport companies licenced by the Confederation receive a total or partial refund of the mineral oil tax. Licenced transport companies for local traffic will no longer receive any refund of the mineral oil tax from January 2026. Licenced transport companies operating outside of local traffic will continue to receive it but from 2030 onwards only in the case when they can prove that it is not possible to convert toward CO2-neutral buses due to topographical reasons.
Amount:
- 2023: CHF 84.65 million
Source: Art. 18 of the Mineral Oil Tax Act; Federal Law on the Reduction of CO2 emissions Section 4 Art.18Abs.1bis., 1ter.