May 26, 2022

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IEA finds petrol price cap in Belgium 'useless'

IEA finds petrol price cap in Belgium ‘useless’

Belgium should abolish the cap on car fuel prices as soon as possible. This is what the International Energy Agency (IEA) advises in the Belgian energy policy review.

The current system, under which the government sets maximum prices for gasoline and diesel, among other things, hampers competition and the introduction of renewable fuels, the International Energy Agency wrote in its comprehensive and critical review. This is why it’s best to hit the line as fast as you can.

Maximum prices were set for motor fuel, but also for heating oil, kerosene, propane and LPG (except for those sold in bottles). In most IEA member states, the government has long taken its hands off fuel market pricing. This resulted in a dynamic engine fuel market without any negative impact on consumers.

The price cap system creates administrative costs for both the government and the oil companies, while there are no obvious benefits. The International Energy Agency reports that the price of diesel in Belgium is one of the highest among the member countries of the International Energy Agency.

Relies heavily on fossil fuels

Another drawback is that the system “raises a potential barrier” to penetration of sustainable biofuels, because there is no reference price for them. This is not the first time that the International Energy Agency has called for the removal of price caps. This also happened in audits conducted in 2016 and 2013. The sector itself is in favor of free pricing. Recently pale That the price cap system forced gas stations to sell fuel at a loss, even though this is also prohibited by law.

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In its comprehensive report, the International Energy Agency was highly critical of Belgium’s energy policy. Despite the successes in its energy transition, Belgium remains highly dependent on fossil fuels. According to the government, the demand for it will continue to rise until at least 2030. There is still much work to be done by all sectors to achieve renewable energy consumption and emission reduction targets,” IEA CEO Fatih Birol wrote in his introduction.

Setting national goals

The report contains dozens of recommendations, one of which is simply the removal of caps on fossil fuel prices. Above all, Belgium must urgently adjust national targets, as the European Union has tightened its climate ambition to cut emissions by 55 per cent by 2030.

The IEA also recommends reforming energy subsidies for vulnerable households in order to increase consumption of renewable energy. Energy taxes also need to be reformed, including by removing a large number of duties and taxes from the price of electricity.

The fact that electricity is expensive in Belgium, while gas was cheap until recently, hampers the energy transition. The IEA also believes that infrastructure work procedures are now too heavy, which is slowing down the energy transition. The International Energy Agency warns that the connection of the second wind turbine region to the North Sea in particular should not be delayed.

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