VW fallout: How Belgium accelerated diesel’s dominance

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Twenty years ago diesel was an also-ran on Belgium’s roads, accounting for less than a third of new cars in the early 1990s. Today that figure is 62 per cent, among the highest on the continent.

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Diesel’s dominance was achieved less through flashy marketing or improved engineering than government policy. Belgium offered lavish benefits for diesel-guzzling company cars and low duties on the fuel itself — despite growing fears about its contribution to air pollution.

Belgium’s experience may seem extreme but data provided by the car industry, international agencies and environmental campaigners suggest the country with a population of just 11m reflects a broader European trend.

In less than two decades diesel vehicles have come to clog the roads from Dublin to Athens, bolstered by intense lobbying from the car industry that has twisted tax and other policies in its favour. For the EU the share of diesel vehicles among new registrations has soared from 23 per cent in 1994 to 53 per cent.

The willingness of EU governments to accede to the German-led motor lobby and support diesel technology has come under scrutiny since Volkswagen revealed that it had been faking results of its tests for the toxic nitrogen oxides (NOx) produced by diesel exhaust.

Many analysts say the catalyst for the shift was a compact between the European Commission and the car industry in 1998. Governments had just sign up to the Kyoto protocol — an early landmark in the fight against global warning — and agreed to cut greenhouse gases. Under pressure to do their part, carmakers pledged to slash vehicles’ carbon dioxide emissions.

Greater use of diesel engines allowed them to do so — even though it increased the output of other pollutants such as NOx, which exacerbates lung ailments.

In Belgium the move to diesel was entwined with a thorny tax code and abundance of company cars. Because Belgium has the highest tax on labour among OECD members, companies there had taken to rewarding employees with cars instead of higher salaries. These often come with company cards to buy fuel.

In a report last year the OECD identified Belgium as providing the largest annual effective subsidy per car: €2,763. Portugal and Germany, it noted, were almost as generous.

More than 40 per cent of new cars hitting the roads in Belgium are company cars, according to the OECD. And more than 80 per cent of these are diesels, according to leasing companies and activists — presumably because the fuel is cheaper.

“People should receive a wage in euros and not in cars and diesel,” said Mathias Bienstman from Bond Beter Leefmilieu, a non-governmental organisation concerned with the environment.

And Belgium is not alone. A 2009 report for the commission by Copenhagen Economics said about half of car registrations in Europe were company vehicles.

Because of pro-diesel rules intended to help businesses such as hauliers every EU country — apart from the UK — imposes a lower tax on diesel than on petrol.

The Belgian duty on petrol is 43 per cent higher than on diesel, according to data from the European Environment Agency. In Germany it is 40 per cent more.

In Greece the tax on petrol is 103 per cent more than that on diesel — and diesel cars represent 63.5 per cent of registrations there, up from 0.7 per cent in 2000.

In June — months before the VW scandal emerged — the EU took Belgium to court over the levels of dangerous airborne particles, which can cause asthma, heart disease and lung cancer. Parts of Brussels and Antwerp have readings for nitrogen dioxide, a variety of NOx, consistently above EU standards.

Before re-examining the company cars’ system, we must first drastically lower the taxes on labour — and not the other way round

– Caroline Dujacquier, finance ministry

Other countries are likely to face similar battles soon. The EU says it has opened infringement proceedings against 16 countries over harmful particles. The same number are failing to comply with nitrogen dioxide levels.

Caroline Dujacquier of finance ministry said Belgium was seeking to establish a “better balance” between diesel and petrol.

The air readings have been improving. But any attempt to roll back tax breaks that benefit hundreds of thousands of families is likely to be difficult.

Ms Dujacquier said the withdrawal of company car benefits was not imminent. The scheme could not be dropped until there was a broader overhaul of the country’s lofty — and politically fraught — income tax regime, she added.

“Before re-examining the company cars’ system, we must first drastically lower the taxes on labour — and not the other way round,” Ms Dujacquier said. “Otherwise we would just be putting additional costs on people.”

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